USDJPY Technical Analysis – Dollar shorts unwind as de-escalation gathers steam
Fundamental Overview . The USD continues to be supported amid the ongoing de-escalation in trade wars. This has most likely to do with positioning rather than fundamentals.
FundamentalOverview
The USD continues to besupported amid the ongoing de-escalation in trade wars. This has most likely todo with positioning rather than fundamentals. The short dollar trade got veryoverstretched so positive news on the tariffs front is providing a pullback. Inthe medium term, the US Dollar should keep on depreciating as the path of leastresistance for the Fed remains to 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 war developments. In summary,the central bank is likely to go faster on rate hikes in case we get a goodtrade deal 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 an upward minor trendline defining the bullish momentum. If weget a pullback, the buyers will likely lean on the trendline to position for arally into the major trendline, while the sellers will look for a break lowerto increase the bearish bets into the 140.00 handle next.
USDJPY TechnicalAnalysis – 1 hour Timeframe
On the 1 hour chart, there’snot much else we can add here as chasing the rally at these levels doesn’t lookgood. We have also the US NFP report today which could provide a pullback incase the data is weaker than expected. The red lines define the average daily range for today.
UpcomingCatalysts
Today, we conclude the week with the US NFP report butwatch out for tariff related news as that’s what really matters for the marketnow.
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