Fundamental
Overview
The USD came under some pressure
at the start of last week following the US CPI report as the data came mostly
in line with expectations. In the following days though, we got some hottish
data with the US PPI beating expectations by a big margin, the US Jobless
Claims improving further and the inflation expectations in the UMich survey surprising
to the upside.
Overall, we ended the week
basically flat on the US dollar as the aggressive dovish expectations on the
Fed got trimmed a bit. Nevertheless, given the overreaction from the Fed members
to the last soft NFP, a September cut looks unavoidable now and only a hot NFP
report in September might get us to a 50% probability (although it would
certainly diminish expectations for rate cuts after the September one).
The focus has now switched to
Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. Traders will
be eager to see if he changes his stance as well. Most likely though, he won’t
pre-commit to anything and just reiterate that they will decide based on the
totality of the data.
On the JPY side, the
currency has been rallying on the back of the dovish expectations for the Fed. For
more JPY appreciation we will need weak US data to increase the dovish bets on
the Fed or higher inflation figures for Japan to price in more rate hikes than
currently expected. Another potential positive driver could be signs of more
fiscal support as that will likely put upward pressure on inflation.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY is still consolidating below the 148.50 level as the market
participants await new catalysts to pick a direction. The sellers will likely
continue to step in around the 148.50 resistance
to keep targeting the major trendline around the 145.50 level, while the buyers
will look for a break higher to pile in for a rally into the 151.00 handle
next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see that the price action has been pretty choppy, so there’s no need to force
anything between the 148.50 resistance and the swing low at 145.86 level. This
week will likely be more about patience than trading as we await Fed Chair Powell’s
speech and then the NFP report in September.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can
see that we have a minor upward trendline
defining the current bullish momentum on this timeframe. On an intraday basis,
the buyers will likely continue to lean on the trendline to keep pushing into
new highs, while the sellers will look for a break lower to target the 145.86
level. The red lines define the average daily range for today.
Upcoming
Catalysts
This week is going to be more about Fed
speakers than economic data. We begin with Fed’s Bowman tomorrow. On Wednesday,
we have the Fed’s Waller and the FOMC meeting minutes. On Thursday, we get the
Japanese and US Flash PMIs as well as the US Jobless Claims figures. Finally,
on Friday, we conclude the week with Japanese CPI and Fed Chair Powell speech
at the Jackson Hole Symposium.
