USDJPY Technical Analysis – The greenback is back under pressure

Fundamental Overview

The USD remains on the backfoot as the support from the more hawkish repricing in interest rates expectations got exhausted. The market is now in line with the Fed’s baseline projection of two cuts in 2025 and we will likely need strong US data to price out the remaining rate cuts and give the greenback a boost.

The recent weakness in the US Dollar got triggered by the weaker than expected US jobless claims figures on Thursday although that might have been an overreaction considering that the data was still below the cycle high at 260K and continuing claims could get positively revised this week.

On the JPY side, the currency weakened across the board recently after we got the news that Japan was considering trimming the issuance of super-long bonds. That was enough to calm the markets in the short term and weigh on the yen.

On the monetary policy side, the market is still unsure on another rate hike given that it’s pricing just 18 bps of tightening by year-end. Nonetheless, that’s been creeping up in the last few weeks supported also by higher than expected Japanese inflation data. The US-Japan trade deal and the evolution of inflation will be key for the BoJ.

USDJPY Technical Analysis – Daily Timeframe

On the daily chart, we can see that USDJPY rejected the 146.00 handle and it’s now on its way towards the 142.35 support zone. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally into the 148.00 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 140.00 handle next.

USDJPY Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more clearly the recent price action with the US Dollar selloff helped by the weaker than expected US jobless claims data on Thursday. There’s not much else we can glean from this timeframe so we need to zoom in to see some more details.

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. 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 start targeting the 148.00 handle next. The red lines define the average daily range for today.

Upcoming Catalysts

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

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