FundamentalOverview

The USD has been under somepressure in the last couple of weeks as the weaker US data and the selloff inthe US stock market increased the expectations for more easing by year-end withthe market now fully pricing in three rate cuts.

Today we get the US CPIreport and it could be a tricky one for the US Dollar. Logically one wouldexpect more weakness for the greenback in case we get a soft report, but wemight even see a counterintuitive short-term appreciation on a relief rally inequities.

A hot report, on the otherhand, might give the greenback a boost against the major currencies on risk-offflows although even here we could see the US Dollar depreciating amid fallinglong term Treasury yields with the market expecting the Fed holding off from cuttingeven in the face of more economic slowdown and eventually leading to moreaggressive cuts.

On the JPY side, the datarecently started to come out on the softer side and Governor Ueda today didn’tsound like someone who’s in a hurry to raise rates amid some uncertainty. TheJapanese Yen in the past couple of weeks has been supported across the board moreby the risk-off sentiment and falling Treasury yields rather than domesticfundamentals.

The market is pricing inaround 32 bps of tightening by year-end with traders awaiting more data on theinflation front to increase the expectations for another rate hike.

USDJPYTechnical Analysis – Daily Timeframe

On the daily chart, we cansee that USDJPY is now testing the key 148.60 level. This is where we canexpect the sellers to step in with a defined risk above the level to positionfor a drop into the 140.00 handle next. The buyers, on the other hand, willwant to see the price breaking higher to increase the bullish bets into the trendline.

USDJPY TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that once we broke above the minor downward trendline, the buyers piled into target a pullback into the 148.60 level. There’s not much else we can addhere as the sellers will look for short opportunities around the 148.60 leveland the major trendline, while the buyers will look for upside breakouts to targetnew highs.

USDJPY TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, we cansee that we now have a minor upward trendline defining the current pullback. Thebuyers will likely keep on leaning on the trendline to push into new highs, whilethe sellers will look for a break lower to increase the bearish bets into the140.00 handle. The red lines define the average daily range for today.

UpcomingCatalysts

Today we have the US CPI report. Tomorrow,we get the US PPI data and the US Jobless Claims figures. On Friday, weconclude the week with the University of Michigan Consumer Sentiment report.

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