FundamentalOverview

The USD got a boost acrossthe board yesterday as the US-China tariff relief was much better thanexpected. The market is now looking at the more hawkish scenario where we getan average 10% global tariff rate and economic activity picks up on an easingin growth fears and general uncertainty.

This is leading to ahawkish repricing in interest rates expectations with the market now seeing 56bps of easing for the Fed by year-end compared to like 120 bps at the peak ofthe fears in April. The short dollar trade was also pretty overcrowded so theunwinding in positioning is giving the greenback even more strength.

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. The recent positivemood in the markets weighed on the Japanese Yen which lost ground against allthe major currencies despite the market increasing the expectations for anotherrate hike this year.

USDJPYTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDJPY broke above the major trendline yesterday following the muchbetter than expected US-China tariff relief. The buyers piled in on thebreakout and will now target the 151.00 handle. The sellers, on the other hand,will want to see the price falling back below the trendline to position for adrop into the 140.00 handle next.

USDJPY TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that we have now an upward trendline defining the bullish momentum on thistimeframe. From a risk management perspective, the buyers will have a betterrisk to reward setup around the trendline, while the sellers will look for abreak lower to increase the bearish bets into new lows.

USDJPY TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much else we can add here as the buyers will look for a bounce around the trendline,while the sellers will look for a break lower. If the bullish momentum staysstrong, we can expect the buyers to increase the bullish bets on the break ofthe recent high at 148.60. The red lines define the average daily range for today.

UpcomingCatalysts

Today, we have the US CPI report. On Thursday, we get thelatest US Jobless Claims figures, the US PPI and the US Retail Sales data. OnFriday, we conclude the week with the Japanese Q1 GDP report and the Universityof Michigan Consumer Sentiment survey.

Watch the video below