USDJPY continues to surge towards the intervention level; Japanese officials look hopeless

FUNDAMENTAL OVERVIEW

USD:

The US Dollar continues to
rebound after the strong selloff experienced in the last couple of weeks of
January. The greenback remains supported by improving US data and strong PMIs potentially
hinting to stronger economic activity going forward. If the data continues to
come out strong, traders will have to pare back their dovish Fed bets, and
that’s going to boost the US Dollar further.

Next week is going to be a
big one. In fact, we will get the US NFP report on Wednesday and the US CPI on
Friday. The trend for the dollar is looking increasingly bullish, but traders
will still look for confirmation from the data to gain more conviction.

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 risks. This is now
in the rear-view mirror and traders are piling back into shorts as the US
Dollar strengthens on better data and expected Takaichi’s victory in the lower
house elections this weekend.

USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that USDJPY continues to rally towards the 159.00 handle where we got the
strong verbal intervention and the talks of “rate checks” that eventually
triggered a huge and quick selloff in the pair. If the price gets there, we can
expect the sellers to step in with a defined risk above the highs to position
for a drop into the major trendline. The buyers, on the other hand, will look
for a break higher to increase the bullish bets into new cycle highs.

USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see that the price broke above the last week’s gap and continued higher as the
buyers increased the bullish bets into the 159.00 handle. There’s not much else
we can glean from this timeframe, so we need to zoom in to see some more
details.

USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see that 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, while the sellers will look for a break lower to pile
in for a pullback into the 155.50 support. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we have the US Jobless Claims and Job Openings data. Tomorrow, we
conclude the week with the University of Michigan Consumer Sentiment data. Over
the weekend, we have the Japanese elections where the LDP is widely expected to
win.