2026-02-03 11:15:00
FUNDAMENTAL OVERVIEW
USD:
The US Dollar rebounded in
the final part of last week with analysts pointing to the nomination of Kevin
Warsh as the next Fed chair as the main catalyst. The reality is that the
strong selloff in the greenback wasn’t backed by fundamentals in the first
place. The greenback didn’t have strong reasons to appreciate, but there wasn’t
a reason for a strong selloff either.
The US data continues to
improve, especially on the labour market side as the US Jobless Claims suggest
a re-acceleration in activity. Yesterday’s US ISM Manufacturing PMI beat expectations by a big margin
with the new orders index jumping to the best levels since 2022. February might
be the month when the US Dollar comes back with a vengeance if we keep getting
strong data.
The NFP report is certainly
the main highlight although it got delayed due to the partial shutdown.
Nonetheless, we will get many other top tier data that could give the greenback
a boost like the US ADP and the ISM Services PMI.
The market is pricing 48
bps of easing by year-end and those bets will be pared back in case the data
strengthens. Conversely, if the data comes out softer than expected, then we
could see the US Dollar coming back under pressure, although the momentum shouldn’t
be as strong as we’ve seen in January.
JPY:
On the JPY side, nothing
has changed. The BoJ held interest rates steady as expected at the last policy
meeting 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 rallied
just on the back of the “rate check” talks and intervention risk. This is now
in the rear-view mirror and traders are piling back into shorts as the US
Dollar strengthens on better data. If this continues, we should see the USD/JPY
rate back around 159.00 in a few weeks.
USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME
USDJPY – daily
On the daily chart, we can
see that USDJPY broke above the 154.50 resistance zone and extended the gains
as the buyers piled in with more conviction to target the 159.00 handle. If we
get a retest of the resistance now turned support, we can expect the buyers to
step in with a defined risk below the support to position for new highs. The
sellers, on the other hand, will want to see the price falling back below the
support to target the major trendline.
USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
USDJPY – 4 hour
On the 4 hour chart, we can
see that we finally closed last week’s gap and the price is breaking above it.
This is where we can expect the buyers to pile in with a defined risk below the
gap zone to keep pushing into new highs. The sellers, on the other hand, will
want to see the price falling back below the zone to position for a drop back
into the support.
USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
USDJPY – 1 hour
On the 1 hour chart, we can
see that the recent price action might have formed a rising wedge. This might
signal a loss of momentum and an imminent correction. The buyers will likely
lean on the bottom trendline to keep pushing into new highs, but if we get a
break lower, the sellers will likely regain control and take us back to the
154.50 support. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow we have the US ADP and the US ISM Services PMI. On Thursday, we get the
US Jobless Claims figures. On Friday, we conclude the week with the University
of Michigan Consumer Sentiment data. On Sunday, we have the Japanese lower house election
where the LDP party is expected to win.
