As US economic data continues to beat expectations, the market is setting itself up for a hawkish path on interest rates as members of the Fed keep repeating that two or more rate hikes are expected if the economy remains strong.
Conversely, the BoJ maintains its dovish stance, keeping rates at -0.10 and YCC at usual settings. Japan’s core inflation is still rising and there are little signs of a possible departure from current policy. As long as the policy divergence between the two central banks continues, we should see more higher highs for the pair.
USDJPY Technical Analysis – Daily Time Frame
USDJPY daily
On the daily chart we can see that after breaking above the key resistance of 142.17, where we also had 61.8% Fibonacci retracement at the level of the entire decline from the October 2022 high USDJPY just continued to strengthen with essentially no declines. The trend is undoubtedly bullish from both the fundamental and technical side, and only bad US data or a hawkish BoJ can change that.
USDJPY Technical Analysis – 4 Hour Time Frame
USDJPY 4 hours
On the 4-hour chart, we can see that the price is now starting to bend as the market consolidates ahead of key economic news in the coming days. The moving averages they are crossing over and this could be a signal of an incoming pullback. A good level of support for buyers to position for new longs is trend line where we can also find the 38.2% Fibonacci retracement level and the previous one resistance has now turned to support. Sellers, on the other hand, will want to see the price break below the support zone to pile up even more aggressively and target the next trend line near the 140 handle.
USDJPY Technical Analysis – 1 Hour Time Frame
USDJPY 1 hour
On the 1 hour chart, we can see that the bullish momentum is weakening as the price has broken out of the rising channel and is now trading between the 144.00 and 145.00 levels. We can expect buyers to pile in if the price breaks the 145.00 resistance. On the downside, we should see more sellers jumping on board once the price breaks below the 144.00 support with a focus on the 142.50 support.
Upcoming events
Today The US has the Independence Day holiday so liquidity in the market will be thinner. The next few days will see top economic indicators such as the US Jobless Claims and ISM Services PMI on Thursday and the main event of the week: the US NFP report on Friday.