USD:
The US dollar has recently
been driven mainly by growth concerns rather than inflation fears. In fact, despite
hotter US inflation data last week, Treasury yields dropped significantly and rate
hike probabilities saw a slightly dovish repricing. Given the
overstretched long positioning in the greenback, we’ve started to see an unwind
which could extend further if growth concerns strengthen.
That’s why tomorrow’s
US Flash PMIs could be an important catalyst. Strong data could quell those
fears and give the US dollar a boost. A soft report, on the other hand, will
likely increase growth concerns and put further pressure on long-term Treasury
yields and the greenback.
JPY:
On the JPY side, the
currency has started to act like a safe haven as market’s focus shifted to
growth. The changes in risk sentiment have been responsible for the daily ebb
and flow as BoJ interest rate expectations remained largely unchanged.
The BoJ is expected to hike
by 25 bps in December and deliver two more rate hikes in 2027. If global growth
deteriorates, though, the central bank might find itself once again hiking into
a slowdown.
For background, the BoJ has
often been criticised for tightening too late because deflation fears have always
clouded the central bank’s judgement. This time may not be so different, but
the JPY would still be supported in case of a global slowdown due to extreme
bearish positioning and safe haven flows.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that USDJPYis consolidating between the 155.00
support and the 160.50 resistance. There’s not much we can glean from this
timeframe, as the buyers will have a better risk to reward setup around the
support, while the sellers will look for short opportunities around the
resistance.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see the price is rejecting the minor support zone around the 156.60 level. We
can expect the buyers to step in here, with a defined risk below the support,
to position for a rally into the 160.50 resistance. The sellers, on the other hand,
will want to see the price breaking lower to pile in for a drop into the 155.00
support next.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as from a risk management perspective, the buyers will
have a better risk to reward setup around the support, while the sellers will
need a break to open the door for new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the latest
US Jobless Claims figures, while tomorrow we conclude the week with the Japanese
CPI report and the US Flash PMIs. The developments in the Middle East, though,
will remain in focus.
This article was written by Giuseppe Dellamotta at investinglive.com.