Recent market developments have seen the US dollar weaken broadly following disappointing ADP employment data and reports that Kevin Hassett has emerged as the frontrunner for the Federal Reserve Chair position. The greenback was already under pressure after Federal Reserve’s John Williams endorsed a rate cut in December, pushing the probability of such a move to 76%, which effectively implies it is highly likely.

In the lead-up to the next FOMC meeting, limited economic data releases are expected. Attention will focus primarily on jobless claims and ADP employment figures, which to date have shown little improvement. Weaker data should continue to weigh on the dollar, while any stronger-than-expected numbers could provide temporary support. Ultimately, the key events for traders are the FOMC decision itself, followed by the non-farm payroll (NFP) and consumer price index (CPI) reports.

Meanwhile, the Japanese yen has been weak since the Bank of Japan’s most recent policy meeting, where interest rates were left unchanged, as expected. Notably, two board members dissented, favouring a rate hike. Governor Ueda’s remarks, focusing on spring wage negotiations, suggested that the next rate increase could be delayed until January or even March 2026. Market speculation around a possible December hike has pushed the probability slightly higher to 33%, driven by the yen’s recent rapid depreciation.

USD/JPY Technical Analysis

On the daily chart, USD/JPY is currently bouncing near a key trendline. Buyers appear to be stepping in, with a defined risk level just below the trendline, positioning for a rally towards 158.87. Conversely, sellers will be looking for a break below this trendline to add downward momentum, targeting the 153.50 support level.

The 4-hour chart shows a minor downward trendline marking the current pullback. Sellers are likely to use this trendline for entries with defined risk above it, aiming to break below the major upward trendline. Buyers will seek a breakout above this minor trendline to extend bullish momentum towards 158.87.

On the 1-hour chart, the price is trading roughly midway between the two significant trendlines, suggesting indecision. Market participants are likely to wait for the price to approach either trendline before making directional bets. The chart also highlights the average daily trading range for today.

Looking ahead, traders should watch for the Tokyo CPI release tomorrow, which concludes the week’s major economic data calendar.

Original Source: Giuseppe Dellamotta of investinglive.com