FundamentalOverview

The USD continues to besupported in the short-term as we head into the FOMC decision and the firsttrade deal. This has most likely to do with positioning rather thanfundamentals. The short dollar trade got very overstretched so positive news onthe tariff front and good economic data is providing a pullback.

The downside seems to belimited for now as the Fed is likely to reiterate its commitment for just tworate cuts this year unless the labour market weakens notably. The NFP reportlast Friday, was much better than expected, so it gives the Fed a reason tokeep its neutral stance for now. In the medium term though, the US Dollarshould keep on depreciating as the path of least resistance for the Fed remainsto cut rates.

On the JPY side, thecurrency has been driven mainly by global events rather than domesticfundamentals. Alongside the Swiss Franc, it’s been the favoured safe haven inthe currencies space amid the swings in risk sentiment. On the monetary policyfront, the BoJ kept interest rates unchanged as expected anddelivered a dovish message.

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

USDJPYTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDJPY continues to pull back from the key 140.00 handle. From a riskmanagement perspective, the sellers will have a better risk to reward setuparound the major trendline to position for furtherdownside, while the buyers will look for a break higher to increase the bullishbets into the 151.00 handle next.

USDJPY TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that we have a strong supportzone around the 144.00 handle where we can also find the upward minor trendlinefor confluence.This is where we can expect the buyers to step in with a defined risk below thetrendline to position for a rally into the major trendline. The sellers, on theother hand, will look for a break below the trendline to invalidate the bullishsetup and pile in for a drop back into the 140.00 handle.

USDJPY TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much else we can add here as the price is testing the support zone. Thebuyers might want to split their orders and lean on both the support and thetrendline. The sellers, on the other hand, will want to wait for a break belowthe trendline before increasing the bearish bets. The red lines define the average daily range for today.

UpcomingCatalysts

Today, we get the US ISM Services PMI. On Wednesday, wehave the FOMC Rate Decision. On Thursday, we get the latest US Jobless Claims figures.On Friday, we conclude the week with the Japanese wage data.

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