USD/JPY consolidates at a key support after yesterday’s suspected stealth intervention

FUNDAMENTAL OVERVIEW

USD:

The US dollar has weakened
across the board yesterday following the US NFP report. The data wasn’t bad,
but it was enough to trigger a slightly dovish repricing in interest rate
expectations. The chances for a July hike dropped to 17% vs 30% before the NFP
release, and the probabilities for a move in September stand now around 50%.

As mentioned previously, given
the Fed’s focus on inflation, the US CPI will likely be more important. For now,
the US dollar will likely stay under pressure until the US CPI release due on
July 14^th.

JPY:

On the JPY side, the
currency jumped higher yesterday early in the European session on a suspected
intervention. The culprit was most likely just speculators unwinding their
positions for fear of an actual intervention as Japanese officials said that
they will stop signalling intervention risks in advance and start focusing on
targeting speculators with stealth interventions.

In the short-term, the
threat of interventions without early warnings might keep the JPY supported,
especially after the mixed NFP report. The focus has now shifted to the US CPI
report which could give the US dollar a boost in case the data surprises to the
upside or add further pressure on it if the data disappoints.

USDJPY TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that USDJPY tumbled yesterday all the way
back to the 160.50 support zone. This is where we can expect the buyers to step
back in with a defined risk below the support to position for a rally into new
highs. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the major upward trendline around the
158.00 handle.

USDJPY TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see the price action became rangebound at the support as the dip-buyers started
to pile in. There’s not much else we can glean from this timeframe as the
buyers will continue to step in around the support to target new highs, while
the sellers will wait for a break lower to increase the bearish bets into new
lows.

USDJPY TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see more clearly the rangebound price action with the 161.50 zone now acting as
resistance. The market participants will likely continue to play the range
until we get a breakout on either side. The red lines define the average daily range for today.