USD:
The US dollar has recovered most of the losses triggered by the softer than
expected NFP reportas the September rate hike probabilities rose back to
50%.
The reason for this whipsaw in expectations is that there was a significant
loss of government jobs, which made the report look much softer than it
actually was. In fact, the unemployment rate painted a different picture,
falling further to 4.1%. Overall, the labour market remains on a better
trajectory than it has been over the past three years.
Today, we have the US CPI report. The data will be critical for the
September FOMC decision and Fed Chair Warsh’s speech at the Jackson Hole
symposium. The focus will be on the Core CPI M/M measure which is expected at
0.2%.
A hot report will likely trigger a rally, with traders increasing rate hike
bets. A soft or even in-line report, on the other hand, should reduce further the
risk of Fed tightening and put further pressure on the greenback.
JPY:
On the JPY side, not much
has changed after the intervention. The only notable development was US
Treasury Secretary Bessent’s remarks to CNBC potentially hinting to a faster
BoJ tightening pace.
In fact, he stated that
“it will require policy to follow up on the intervention” and added
that the “US would not have joined if it was not optimistic about Japan
policies”. Japan’s currency diplomat Mimura stated that he had a shared
understanding with the BoJ following the intervention, which might be another
hint to faster rate hikes.
Finally, we got a report
from Jiji yesterday saying that the BoJ may consider a rate hike at its
September meeting according to sources. These kinds of reports ahead of BoJ
meetings have always resulted in the central bank following suit, so we can
expect the BoJ to hike in September to 1.25%. The market pricing is a bit more
cautious with just a 58% probability of a rate hike.
Overall, the trend is
unlikely to change without a dovish repricing in Fed interest rate expectations
or a faster BoJ tightening pace.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPYhas been slowly recovering
ground after the intervention, with the first major target being the resistance
zone around the 160.50 level. If the price gets there, we can expect the
sellers to step in with a defined risk above the resistance to position for a
drop back into the 155.00 handle. The buyers, on the other hand, will look for
a break to increase the bullish bets into new cycle highs.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
an upward trendline defining the bullish momentum. If we were to get a pullback
into it, we can expect the buyers to lean on the trendline with a defined risk
below it to keep pushing into new highs. The sellers, on the other hand, will
look for a break to pile in for a drop into the 155.00 handle next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have
a minor support zone around the 158.50 level. If we were to get a pullback, we
can expect the buyers to step in around the support with a defined risk below
the trendline to keep pushing into new highs. The sellers, on the other hand,
will need to wait for a break below the trendline to gain more conviction for a
move back into the 155.00 handle. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the US
CPI report. Tomorrow, we get the US PPI data and the latest US Jobless Claims
figures. On Friday, we conclude the week with the US Retail Sales and the
University of Michigan Consumer Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.