USD:
The US dollar weakened across the board on Friday following a softer than expected
NFP
report, with the headline showing negative payroll growth and average
hourly earnings missing forecasts by a notable margin.
The data triggered a dovish repricing in interest rate expectations, with
the probability of a September rate hike falling to 38%, compared with 54%
before the release. Market pricing has normalised since then, with the
probability of a September hike rising back to 48%.
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. 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.
The next major event will be the US CPI report on Wednesday. The data will
be critical for the September FOMC decision and the Jackson Hole Symposium.
A hot report will likely trigger a rally in the US dollar, with traders increasing
rate hike bets. A soft report, on the other hand, should reduce further the
risk of Fed tightening and put more 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.
Overall, without a change
in the fundamentals, the interventions will continue to be just clearing events
to rebuild positions at better levels. 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 USDJPYis 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 now
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 can
see the price is breaking above the minor 158.50 resistance. We can expect the
buyers to increase the bullish bets around these levels with a defined risk
below the resistance to keep pushing into the 160.50 level. The sellers, on the
other hand, will want to see the price falling back below the resistance to target
a pullback into the trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On Wednesday, we
have the US CPI report. On Thursday, 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.