Markets Analysis

Fundamental Analysis

• US employment data came in below expectations, unemployment rate rises
• USDJPY experiences two foreign exchange interventions, be wary of short to mid-term trend reversals
• Dovish stance by the US Federal Reserve intensifies dollar selling, pay attention to statements from Fed officials

USDJPY technical analysis

Analyzing the daily chart of USDJPY. Last week, two foreign exchange interventions were carried out by Japanese monetary authorities. The week saw significant volatility, moving from the 160 JPY level down to 151 JPY, with the scale of intervention estimated to be the same as in 2022.

The weekly chart shows a ‘high close bearish engulfing candle’ as a bearish signal, indicating no change in the major downtrend but playing a role in potential short to mid-term trend reversals.

Additionally, weaker US employment data has reignited expectations for a rate cut, increasing the likelihood of a rate cut in September and strengthening dollar selling. This backdrop has applied brakes to the unidirectional depreciation of the yen, and profit-taking activities are expected to intensify.

On the daily chart, the 52-day moving average is a significant level, with 150.50 JPY expected as the lower boundary for May, where a slowdown in the decline might occur. Around 150.50 JPY, there are technical supports like the 90-day moving average and the Ichimoku cloud, suggesting potential buying on dips. If the level falls below 150 JPY, buying on dips is expected, thus sensitivity to movements is crucial.

Day trading strategy (1 hour)

Analyzing the 1-hour chart for USDJPY.

As expected, the Fibonacci expansion was strongly respected, dipping below 152.20 JPY and briefly touching the 151 JPY level. The impact of foreign exchange intervention is expected to subside, and a return to the yen depreciation trend might be possible. However, the weekly chart shows bearish signals, and it is crucial to determine the direction carefully. It is important to be aware that the market is no longer unilaterally yen weakening.

Based on this, today’s day trading strategy is to consider selling on rallies. Entry at 153.35 JPY, target at 151.85 JPY, and stop at 153.65 JPY.

Support/Resistance lines

Key support and resistance lines to consider going forward:

150.85 JPY – 90-day moving average
150.50 JPY – Monthly support line

Market Sentiment

USDJPY Sell: 44%, Buy: 56%

Featured Currency Pair of the Week (EURAUD)

Analyzing the daily chart for EURAUD. Typically, cross currency pairs between Europe and Oceania, such as the Euro and Australian Dollar, are known for their tendency to develop trends more swiftly compared to cross-yen pairs like GBPJPY.

Currently, the EURAUD chart shows a strengthening downward trend. The -DI is at 30, and the ADX has risen to 25, indicating a bearish trend.

The key support levels are anticipated at 1.6211 AUD, 1.615 AUD, and 1.6092 AUD. 1.615 AUD is close to the low in December 2023, suggesting a possible rebound. Focus should be on whether it will decisively break below 1.6250 AUD.

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.