USD/JPY ANALYSIS & TALKING POINTS
- Japanese GDP smashes forecasts!
- US jobless claims release places dollar on the backfoot.
- Rising wedge could point to impending downside.
JAPANESE YEN FUNDAMENTAL BACKDROP
The Japanese Yen rallied towards the latter part of the European trading session but started the day on the front foot after strong Japanese GDP figures (see economic calendar below). Despite the dovish rhetoric passed on by Bank of Japan (BOJ) Governor Ueda, a strong growth report may help push the BOJ to make policy changes sooner than expected.
The bigger move stemmed from the large miss on US initial jobless claims data which carries more weight than the continuous jobless claims print as it measures new and emerging unemployment. Markets reacted ‘dovishly’ from a Fed point of view, now repricing in a 75% chance of a rate pause after yesterday’s Bank of Canada (BOC) shock. US Treasury yields swiftly pulled back with the 2-year briefly dipping below the 4.5% handle. The week ahead is likely to remain relatively quiet as markets anticipate next week’s US CPI and FOMC announcement which is sure to stir up some volatility.
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JPY ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
USD/JPY TECHNICAL ANALYSIS
Introduction to Technical Analysis
Candlestick Patterns
Recommended by Warren Venketas
USD/JPY DAILY CHART
Chart prepared by Warren Venketas, IG
Daily USD/JPY price action looks to be trading within a short-term rising wedge chart pattern (black) centered around the 140.00 psychological level. A confirmed break below wedge support could open up the 138.45 zone but the USD may hold onto its recent gains until more clarity is given via the inflation and Fed announcement respectively. Should we see dwindling inflation and a dovish Fed, JPY strength may ensue.
Key resistance levels:
- Wedge resistance
- 140.00
Key support levels:
- 138.45
- 137.91
IG CLIENT SENTIMENT MIXED
IGCS shows retail traders are currently net short on USD/JPY, with 68% of traders currently holding short positions (as of this writing). At DailyFX we take a contrarian view on sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious disposition.
Contact and followWarrenon Twitter:@WVenketas
