USDJPY Technical Analysis – The US Dollar is back in the driving seat

Fundamental
Overview

The puzzling weakness in
the US Dollar following Trump’s victory looks more and more like it was just a “sell
the fact” reaction. The greenback is now back in the driving seat, and we might
also be seeing some pre-positioning into a potentially hot US CPI report
tomorrow.

At the latest Fed’s
decision, Fed Chair Powell said that they expect bumps on inflation and that
one or two bad data months on inflation won’t change the process. This keeps
the 25 bps cut in December in place even if we get higher inflation readings.

The market though is
forward-looking, and the rise in Treasury yields showed that the market sees
risks to the inflation outlook. Moreover, the red sweep could increase those
fears if the progress on inflation stalls, or worse, reverses.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY continues to consolidate above the key 152.00 support
zone maintaining a bullish bias. If we were to get another pullback into the
support, we can expect the buyers to step in once again to position for a rally
into the 160.00 handle. The sellers, on the other hand, will want to see the
price breaking lower to pile in for a drop into the 148.00 handle next.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor upward trendline defining the current bullish
momentum. The price recently bounced near the trendline and we can expect the
buyers to keep leaning on it, while the sellers will look for a break lower to
gain more conviction for a bigger correction to the downside.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor support zone around the 153.40 level. This is where
the buyers are stepping in with a defined risk below the zone to position for
the continuation of the uptrend. The sellers, on the other hand, will want to
see the price breaking lower to target a pullback into the trendline. The red
lines define the average daily range for today.

Upcoming
Catalysts

This week is a bit empty on the data front with the most important releases
scheduled for the latter part of the week. Tomorrow, we have the US CPI report.
On Thursday, we get the latest US Jobless Claims figures. On Friday, we
conclude the week with the US Retail Sales data.

See the video below