Fundamental Overview
The US dollar (USD) has weakened against other currencies despite a strong US ADP and ISM Services PMI. This reaction from the market usually signals a short-term top, indicating that the market needs more to keep the trend going. The market pricing is now showing a 63% probability of a December cut, which seems about right. The NFP and CPI reports will have the final say, and hopefully, we will get them before the next FOMC decision.
Currency Updates
On the Japanese yen (JPY) side, the currency has been weakening since the last BoJ policy decision, where the central bank left interest rates unchanged as expected with two dissenters voting for a hike. There were no surprises, but Governor Ueda focusing on spring wage negotiations suggested that the next hike could be delayed to January or even March 2026. We got some verbal intervention last week from the Japanese Finance Minister near the 155.00 handle, which is generally just short-term stuff that provides pullbacks for traders as long as the conditions for more yen weakness persist.
USDJPY Technical Analysis
Daily Timeframe
On the daily chart, we can see that USDJPY probed below the 153.27 level but eventually bounced back above it. The price action has been kind of rangebound below the 155.00 handle as market participants await new catalysts.
4 Hour Timeframe
On the 4-hour chart, we can see more clearly the rangebound price action above the 153.00 handle. We got a break below the upward trendline last week, but it turned out to be a fakeout. There’s not much we can add, so we need to zoom in to see some more details.
1 Hour Timeframe
On the 1-hour chart, we can see that we have a downward trendline acting as resistance. This is where the sellers are stepping in with a defined risk above the trendline to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
Upcoming Catalysts
This week is pretty empty on the data front, with only the weekly US ADP data scheduled for tomorrow.
Conclusion
In conclusion, the USD has weakened despite strong US data, and the market is pricing in a 63% probability of a December cut. The JPY has been weakening since the last BoJ policy decision, and verbal intervention from the Japanese Finance Minister has provided some short-term pullbacks. The USDJPY technical analysis shows rangebound price action, with a downward trendline acting as resistance on the 1-hour chart. With limited data scheduled for this week, market participants will be waiting for new catalysts to drive the trend.
