USDJPY Technical Analysis – Eyes on the US NFP report

Fundamental
Overview

The USD continues to be
under pressure as the positive tariffs talks on Monday eased the trade war
fears and weighed on the greenback. In fact, trade war fears have been the only
thing keeping the bid under the USD as interest rate expectations and economic
data took the second place in importance.

As a reminder, the
repricing in rate cuts expectations reached the peak after the last US NFP
report and then the market returned into a dovish pricing following the benign
US inflation data (the market is still pricing roughly two rate cuts for 2025).

Today, we get the January
NFP and it could be another good report. That might lead to a short-term relief
rally for the US Dollar but as we’ve seen with the US Job Openings data, the
labour market continues to normalise and it’s not a source of inflationary
pressures anymore. So, the potential US Dollar rally might be faded.

That doesn’t mean that the
Fed will cut more than the two times projected for this year, but it also
doesn’t call for a more hawkish repricing yet. So, the path of least resistance
for the US Dollar (barring negative tariffs outcomes) might remain to the
downside as a more dovish path going forward looks more probable.

On the JPY side, this week
we got the Japanese wage data which beat expectations by a big
margin and gave the yen a strong boost as the market increased the bets for a
potential third hike this year. We’ve also got some hawkish comments from BoJ
officials which kept the bullish momentum going in the yen.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY extended the drop into the 151.00 handle following the strong
Japanese wage data and the hawkish comments from BoJ officials. The target for
the sellers remains the swing low around the 149.00 handle. There’s not much
here where the buyers or sellers can lean onto as the only notable resistance
stands around the 154.00 handle.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is testing the lower low around the 151.82 level. The
sellers might step in here with a defined risk above the level to extend the
drop into new lows. The buyers, on the other hand, will want to see the price
breaking higher to position for a deeper pullback into the 152.88 level next.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much we can add here as the sellers will look for short opportunities
around the 151.82 and 152.88 level, while the buyers will look for breaks to
position for new highs. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP
report.

Watch the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.