USDJPY Technical Analysis – Risk off returns amid disappointing headlines

Fundamental Overview

The USD remains under pressure against most major currencies although the fundamental backdrop remains unclear. The most popular narrative is that everyone is selling US assets, and the greenback is losing its reserve status as a consequence of the aggressive trade war.

Such big claims are generally made at near term tops or bottoms, so it calls for caution. Anyway, that’s the trend for now and we will need some catalyst to reverse it. Maybe positive news on trade negotiations front could see the market scale back the rate cut expectations for the Fed and provide a relief rally for the greenback.

For now, we got just a couple of disappointing headlines with the US banning the sale of Nvidia chips to China and European officials suggesting that the tariffs could stay as negotiations stall. We will see how things will evolve in the next days and weeks.

On the JPY side, the currency has been driven mainly by global events rather than domestic fundamentals. It’s been supported more by the risk-off flows rather than interest rates expectations as the market doesn’t see the BoJ hiking rates anymore this year. In fact, BoJ Governor Ueda today sounded like more tightening now is out of question and the central bank might even resort to some easing in case things deteriorate further.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY continues its downward trajectory towards the 140.00 handle. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally back into the major trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price rolled back to the 142.05 low as the selling pressure returned. From a risk management perspective, the sellers will have a better risk to reward setup around the 144.56 level to position for further downside. The buyers, on the other hand, will want to see the price breaking above the 144.56 level to start targeting a bigger pullback into the 148.25 level next.

USDJPY Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the recent low around the 142.00 handle has been holding up pretty well. This is where we can expect the buyers to step in with a defined risk below the level to position for a pullback into the 144.56 level. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 140.00 handle next. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US Retail Sales and Fed Chair Powell speaking. Tomorrow, we get the latest US Jobless Claims figures, while on Friday we conclude the week with the Japanese CPI. As a reminder, the market is focused on tariff negotiations at the moment, so the data is not as market-moving as it used to be in the past months.

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