USDJPY consolidates below a key resistance as intervention fears wane. What’s next?

FUNDAMENTAL OVERVIEW

USD:

The US Dollar remains on
the backfoot as the bearish momentum set by the USD/JPY intervention risks kept
weighing on the greenback. US Treasury Secretary Bessent yesterday said that
they are not intervening in dollar-yen now and that gave the dollar a bit of a
boost although it didn’t last long.

The Fed kept interest rates
unchanged as expected and upgraded a bit its current economic outlook in the
statement to reflect the recent economic data. There was no surprise other than
Fed’s Waller voting for a cut. That might have been just his last attempt to
secure the nomination for the Fed chair job. Time will tell.

Fed Chair Powell didn’t
offer much in terms of forward guidance and just stuck to the script by
reiterating the neutral stance and data-dependency. Today, we get the latest US
Jobless Claims figures which could give the dollar some support if they come out
strong. Otherwise, the greenback might remain on the backfoot until further
notice.

JPY:

On the JPY side, nothing
has changed. As a reminder, the BoJ left interest rates unchanged as expected
last week and upgraded slightly growth and inflation forecasts due to the
expansionary fiscal policies.

Governor Ueda didn’t offer
anything new in terms of forward guidance as he just repeated that they will
keep raising rates if the economic outlook is realised. He also added that
April price behaviour will be a factor to mull over a rate hike. This suggests
that April is when they expect to deliver another rate hike if the data
supports such a move.

The Japanese Yen strengthened
across the board solely because of talks of “rate checks” as market
participants feared an imminent intervention, which eventually never came. Interventions
don’t fix the fundamental problems, so the JPY should continue to weaken until
the BoJ turns more hawkish.

USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that USDJPY is consolidating below the key 154.50 support now turned
resistance. The sellers will likely step in around the resistance with a defined
risk above it to position for a drop into the major trendline. The buyers, on
the other hand, will look for a break higher to pile in for a rally back into
the 159.00 handle.

USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see that the strong bearish momentum has faded recently. There’s not much else
we can add here as the sellers would have a better risk to reward setup around
the resistance, while the buyers will look for a break higher to pile in for
new highs.

USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see that we have a minor upward trendline defining the current price action. If
we get a pullback into the trendline, we can expect the buyers to lean on it to
keep pushing into new highs, while the sellers will look for a break lower to
increase the bearish bets into the major trendline. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we get the latest US Jobless Claims figures. Tomorrow, we conclude
the week with the Tokyo CPI and the US PPI report.