USDJPY Technical Analysis – Trump’s tariffs rattle markets

Fundamental
Overview

The USD is once again
higher across the board as Trump followed through with his threats and imposed
tariffs on Canada, Mexico and China on Saturday. We saw also other markets
like the stock market opening with big gaps due to the negative macroeconomic implications
of trade wars.

There’s still some hope in
the markets that the tariffs will be lifted quickly as the countries involved
will get to a deal. In fact, today the focus will be on Trump’s talks with
Canada and Mexico expected in the first half of the US session.

On the JPY side, not much
has happened since the last BoJ policy decision where the central bank hiked interest rates by 25 bps as widely expected but
didn’t offer much in terms of forward guidance.

The latest Tokyo
CPI came in line with forecasts although a touch higher than the prior
reading. This week we have the Japanese wage growth data, but the yen continues
to be driven more by the Treasury yields and the bouts of risk off sentiment.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY continues to consolidate around the major trendline with the price now trading
back above it. The buyers will likely step in around these levels to position
for a rally into the 160.00 handle. The sellers, on the other hand, will want
to see the price falling back below the trendline to position for the drop into
the 149.00 handle.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the pair has been basically ranging for several weeks between the
156.60 resistance
and the 155.00 support although we got two failed downside break outs. As the
price broke above the 155.00 level again, the buyers piled in for a rally into
the resistance. The sellers will need the price to fall back below the support
to regain conviction for new lows.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor upward trendline defining the current bullish momentum.
The buyers will likely continue to lean on the trendline to push into new
highs, while the sellers will want to see the price breaking lower to start
targeting new lows. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US ISM Manufacturing PMI and Trump speaking
with Canadian and Mexican officials on the tariffs. Tomorrow, we get the US Job
Openings data. On Wednesday, we have the Japanese wage growth data, the US ADP
and the US ISM Services PMI. On Thursday, we get the latest US Jobless Claims
figures. On Friday, we conclude the week with the US NFP report.

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