USDJPY Technical Analysis – Will the Fed push back against the dovish pricing?

Fundamental Overview

The USD came under pressure again this week as some disappointing headlines on the tariffs front hit the sentiment. The de-escalation continues though and tonight we got the news that the US and Chinese representatives will meet in Switzerland in the coming days to start engaging in discussions.

Today, we also have the FOMC policy decision where the Fed is expected to keep interest rates unchanged and could push back against the dovish market pricing giving the greenback a boost in the short term.

On the JPY side, the currency has been driven mainly by global events rather than domestic fundamentals. Alongside the Swiss Franc, it’s been the favoured safe haven in the currencies space amid the swings in risk sentiment. On the monetary policy front, the BoJ kept interest rates unchanged as expected and delivered a dovish message.

This was then echoed by BoJ Governor Ueda which placed a great deal on trade developments. In summary, the central bank is likely to go faster on rate hikes in case we get a good trade deal and delay rate adjustments in case the trade deal disappoints.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY erased most of last week’s gains in the past couple of days and threatens to extend the bearish move into the 140.00 handle. From a risk management perspective though, the sellers will have a better risk to reward setup around the major trendline to position for further downside, while the buyers will look for a break higher to increase the bullish bets into the 151.00 handle next.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we broke below the strong support zone around the 144.00 handle where we had also the upward minor trendline for confluence. The sellers piled in with more conviction on the break to target the 142.00 handle next. The buyers, on the other hand, will likely step in around the 142.00 handle to position for a rally back into new highs.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely continue to lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to pile in for a rally into the major trendline. The red lines define the average daily range for today.

Upcoming Catalysts

Today, we have the FOMC Rate Decision. Tomorrow, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the Japanese wage data.

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