USDJPY Technical Analysis

USD

• The Fed left interest rates unchanged as expected
  at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed once again that they are
  proceeding carefully as the full effects of policy tightening have yet to be
  felt.
• The US Core PCE yesterday came in line
  with forecasts with the disinflationary progress continuing steady.
• The labour market is starting to show weakness as Continuing
  Claims are now rising at a fast pace and the recent NFP report missed across
  the board.
• The latest US PMIs came basically in line
  with expectations with a miss in the Manufacturing index and a beat in the
  Services measure.
• The US Consumer Confidence this week beat
  expectations although the details about the labour market continued to weaken.
• The hawkish Fed members recently shifted
  their stance to a more neutral position.
• The market doesn’t expect the Fed to hike anymore.

JPY

• The BoJ kept its monetary policy basically
  unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
  JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again
  that they won’t hesitate to take easing measures if needed and that they are
  not foreseeing sustainable price increases.
• The Japanese CPIlast week showed that inflation pressures are easing
  although they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate ticked
  lower with the labour market remaining strong.
• The recent Japanese Manufacturing
  PMI fell further into contraction, but the Services PMI ticked higher remaining
  in expansion.
• The latest Japanese wage data beat
  expectations. As a reminder the BoJ is focusing on wage growth to decide
  whether to tweak its monetary policy.
• The market expects the BoJ to keep
  interest rates unchanged at the next meeting as well.

USDJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see
that USDJPY managed to fall into the key
trendline around the 146.50 level where it bounced as the sellers might want to
wait for a stronger catalyst before going for the breakout. A break below the
trendline, and especially below the 145.00 handle, will be strong bearish
signals and will likely confirm the top in the pair with the cycle lows being
targeted next.

USDJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
lower into the key upward trendline diverged with the MACD. This is generally a
sign of weakening momentum often followed by pullbacks or reversals. The
sellers should step in around the downward trendline with a defined risk above
it to position for a drop back into the major trendline and target a breakout.
The buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and position for a rally back into the 150.00
handle.

USDJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action around the trendline. What happens here will
likely decide where the pair goes next. A break to the upside should trigger a
rally into the 150.00 handle, while a rejection and a break below the 147.60
level will make things even more interesting as the sellers will target a breakout.

Upcoming Events

Today, the main event will
be the release of the US ISM Manufacturing PMI which missed expectations by a
big margin the last time. A strong report is likely to give another boost to
the US Dollar while weak figures could weigh on the greenback in the short term.