USD/JPY holds above the 160.00 mark as traders look beyond the imminent BoJ rate hike
FUNDAMENTAL OVERVIEW
USD:
The US dollar rallied strongly across the board on Friday as the very hot NFP gain with higher revisions for the prior months served as a wake-up call that the Fed could be forced to raise interest rates. The job gains have been much higher than the estimated breakeven rate lately. The unemployment rate fell to an unrounded 4.29% vs 4.33% in the prior month.
Following the NFP report, the market fully priced in a rate hike by year-end with the total tightening standing at 26 bps right now. We can now expect the Fed to drop the easing bias at the upcoming meeting, but the focus will be mostly on the dot plot and forward guidance. Even though a rate hike is now fully priced in, if the Fed endorses the market pricing, it will effectively confirm that the bias has now shifted to tightening and might trigger another rally in the greenback.
This week, the most important event is the US CPI report due tomorrow (barring a surprising breakthrough in US-Iran negotiations). The question for markets is now when and how many rate hikes the Fed might deliver by year-end. Upside surprises would be seen as more hawkish and will likely give the US dollar a boost. Conversely, lower than expected figures should alleviate some of the most hawkish fears and might trigger a pullback in the short-term.
JPY:
On the JPY side, we’ve been getting more reports saying that the BoJ is going to hike to 1% next week, so that’s now a done deal. Moreover, the BoJ is expected to pause its bond tapering plan from next fiscal year, which kind of removes the hawkish flavour of the rate hike as conditions will remain accommodative.
This rate hike looks driven more by the weakening Japanese yen as inflation trends haven’t been urging for a rate hike at all. All in all, the BoJ might deliver a dovish hike which is likely to keep weighing on the currency.
The market is now pricing in an 87% chance of a hike next week with a total of 44 bps of tightening by year-end.
USDJPY TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that USDJPY continues to slowly edge higher and it’s getting closer to erase the entire drop since April. The natural target should be the cycle high around the 162.00 handle. If we get there, we can expect the sellers to step in with a defined risk above the cycle high to position for a correction into the major trendline. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
USDJPY TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a minor upward trendline defining the bullish momentum. The buyers will likely continue 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 lower to pile in for a drop into the 158.00 support zone.
USDJPY TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we another minor upward trendline on this timeframe. The buyers will likely continue to lean on it with a defined risk below it to keep pushing into new highs, while the sellers will look for a break to extend the pullback into the next trendline. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the US CPI report. On Thursday, we get the latest US Jobless Claims figures and the US PPI report. On Friday, we conclude the week with the University of Michigan consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
FX初心者には必須 無料のうちにGET！
