Basic overview
The US CPI yesterday's report was in line with expectations and sealed the 25 bps cut next week with the probabilities around 97%. Overall, market prices remained largely unchanged around three rate cuts by the end of 2025.
This contributed to some weakness in the US Dollar although we are still consolidating around the highs. The market is likely to need stronger evidence of accelerating inflation to price in the remaining rate cuts. For now, we reached the highest level in re-prices.
On the JPY side, the market increased the probability of no change to this month's BoJ decision after a report from Bloomberg yesterday saying that the central bank sees little cost in waiting for the next rate hike.
This is nothing new as the market was already trending unchanged, but the JPY weakened overall, however. The focus should be on the US Treasury yield. If today's US PPI comes in soft, we can expect JPY strength.
USDJPY Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can see that USDJPY broke above the key level of 151.90 yesterday after the Bloomberg report on the BoJ. The buyers entered the breakout and will now focus on rallying into the 160.00 area. The sellers, on the other hand, will want to see the price fall back below the 151.90 level to set up for a drop back to the lows.
USDJPY Technical Analysis – 4 Hour Time Frame
USDJPY 4 hours
On the 4 hour chart, we see that the price broke through strong the face
zone as we also had down line of motion for confluence. There is not much else we can add here as the buyers will likely rally around these levels to target new highs, while the sellers will be watching for falling back below the trendline to target a drop in the lows.
USDJPY Technical Analysis – 1 hour timeframe
USDJPY 1 hour
On the 1 hour chart, we can see that we have a small trend line up defining the current bullish trend. If we get a pullback into it, we can expect the buyers to continue the move to position for new highs with a better risk to reward position. The sellers, on the other hand, look for a lower break to target new levels. The red lines define the average daily range for today.
Catalysts to come
Todaywe get the latest US Jobless Claims and US PPI numbers. Tomorrow, we finish the week with the BoJ Tankan Index.
See the video below
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