USDJPY Technical Analysis – The chances for a third hike increase

Fundamental Overview

The US Dollar fell across the board in the final part of last week for two main reasons. The US PPI report came in higher than expected but the focus was on the details that feed into the Core PCE index, which is what the Fed focuses on. Those details were all very soft and helped to bring the early estimates down to more benign levels. In fact, the Core PCE Y/Y is now projected to fall to 2.6% vs. 2.8% in the prior month. That’s good news for the Fed.

Eventually, the bearish momentum increased substantially as the Trump’s tariffs saga came to an end. In fact, the US President announced his reciprocal tariffs that could go into effect in April but the overall tone of it wasn’t aggressive and sounded a lot like the start of a negotiating process to bring tariffs to a fair level for everyone.

On the JPY side, we got the Japanese Q4 GDP today and the data came in much higher than expected which boosted the Yen as the market increased the chances for a third rate hike by the end of the year.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY eventually rejected the trendline and extended the drop below the 152.00 handle following a benign US PPI and Trump’s reciprocal tariffs announcement. The sellers will continue to target the 149.00 handle, while the buyers will likely step in around the recent low around the 150.93 level to position for a bounce into the trendline.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a minor resistance zone around the 152.50 level. If we get a pullback into it, we can expect the sellers to step in with a defined risk above the resistance to position for a drop below the 150.93 level. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the trendline.

USDJPY Technical Analysis – 1 hour Timeframe

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

Upcoming Catalysts

This week is pretty empty on the data front with the most important releases scheduled for the latter part of the week. On Thursday, we get the latest US Jobless Claims figures, while on Friday we conclude with the Japanese CPI and the US Flash PMIs.

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