USDJPY Technical Analysis – The soft US data triggered a correction

July 5, 2024 10:13 am

Fundamental
Overview

The USD weakened across the
board following soft US Jobless Claims and ISM Services PMI reports. Overall, the data didn’t
change much in terms of interest rates expectations, but it reinforced the view
that the Fed is going to deliver at least two rate cuts by the end of the year.
All else being equal, the risk sentiment should remain supported amid the pickup
in global growth.

Even if the US Dollar
weakens against the other major currencies, the JPY in this environment should
keep losing ground and the Japanese officials can’t do much to reverse the
trend unless the fundamentals change. We will likely need weak US growth data
to see some sustained Yen strength, although it might be short lived if it’s
not enough to make the market to price in more aggressive rate cuts for the
Fed.

USDJPY
Technical Analysis – Daily Timeframe

USDJPY Daily

On the daily chart, we can
see that USDJPY started a pullback after the soft US data on Wednesday. From a
risk management perspective, the buyers will likely step back in around the 160.00
level with a defined risk below it to position for a rally into new highs.

The sellers, on the other
hand, will want to see the price breaking below the 160.00 handle to increase
the bearish bets into the major trendline
around the 157.00 level.

USDJPY Technical
Analysis – 4 hour Timeframe

USDJPY 4 hour

On the 4 hour chart, we can
see that the price broke below a key minor trendline that was defining the bullish
momentum from the 156.00 level. The sellers piled in one the break to position
for a drop into the 160.00 level. That’s where the buyers will look to buy the
dip with a better risk to reward setup.

USDJPY Technical
Analysis – 1 hour Timeframe

USDJPY 1 hour

On the 1 hour chart, we can
see that the latest leg lower printed a new lower low, so we now have a minor
downward trendline defining the current bearish momentum. If we get a pullback,
the sellers will likely lean on the trendline to position for a continuation of
the pullback into the 160.00 handle with a better risk to reward setup.

The buyers, on the other
hand, will want to see the price breaking higher to regain some control and
position for a rally into new highs. The white lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the data is expected
to show 190K jobs added in June and the Unemployment Rate to remain unchanged
at 4.0%.

See the video below

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