USDJPY Technical Analysis – Deadly mix sends the pair higher

Fundamental
Overview

The USD got a boost from the
FOMC decision as the market perceived it as more
hawkish than expected. Overall, apart from some slight tweaks, the Fed matched
the market’s pricing. Nonetheless, the market reacted in a big way pushing
Treasury yields higher and giving the USD a tailwind.

The data is what really
matters now as it will decide what the Fed is going to do. They switched their
focus on inflation again, so it will likely take just one soft CPI report in
January to see the market reacting in a dovish way sending Treasury yields and
the US Dollar lower.

On the JPY side, the BoJ
left interest rates unchanged as expected but Governor Ueda delivered a less
hawkish than expected presser. In fact, he placed a great deal on wage
data to decide on the timing of the next rate hike and added that the trend
will become clearer in March or April.

This made the market to
price out the probabilities for a hike
in January and push back once again to the next meeting which is scheduled for
March.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY extended the rally into the 158.00 handle following a slightly
more hawkish FOMC decision and a more dovish BoJ announcement. This was a
deadly mix for the pair as the bullish momentum picked up strongly.

From a risk management
perspective, the buyers will now have a better risk to reward setup around the trendline
although we will need some weak US inflation data to push the pair so much
lower.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is now testing the previous high. This is where we can
expect more aggressive buyers stepping in with a defined risk below the level
to position for an extension into the 160.00 handle next. The sellers, on the other
hand, will want to see the price breaking lower to start targeting the minor upward
trendline around the 155.00 handle.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the price reacting to the 156.75 level as the buyers pile in.
There’s not much else to add here as the buyers will look for a bounce and the
sellers for a break lower. Watch out for the US PCE report today as a miss
could trigger a pullback in the pair. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we conclude the week with the US PCE data.

See the video below