US July jobs report to set tone for the rallying USD

USDJPY screams higher.
It’s easy to build a fundamental story to support the ripping USDJPY rally that soared above range resistance and the 149.60 area 200-day moving average to as high as 150.92 overnight. US data was positive Wednesday and Fed Chair Powell was marginally hawkish, and the Bank of Japan revised its core CPI Forecasts sharply higher while Governor Ueda clearly indicated in the press conference that the bank plans on doing absolutely nothing about it for now, preferring to sit on its hands to see how the “hard data” shapes up after the implementation of Trump tariffs. But the coincident support for the move isn’t really there to support the price action, especially the chief vulnerability for the yen: some kind of existential pressure on the JPY from a chaotic move in long bond yields globally. It feels like this was a positioning capitulation that added a bit of energy to the move, as well as the fall of that psychological 150.00 level. So, barring a strong US jobs report today.

Tariffs
Of the G10 currencies, CAD and CHF are most impacted by yesterday’s new Trump tariff rates, with an ugly 35% for Canada (only affects non-USMCA goods, but some of these are very important for Canada, including lumber, aluminum and steel). The 39% of Switzerland is very steep, but nothing seems to affect the teflon Swiss franc.

Chart: EURUSD
This is a tough spot for the chart technician as we have cut down through key range support at 1.1557 this week and therefore well down through the prior cycle high of 1.1573, both bearish developments. But in the bigger picture this is a correction within a huge uptrend off the 1.0141 low and the local sell-off is extremely steep, so risk/reward for trading levels is poor. Resistance is now 1.1500-1.1550 and the next focus lower is perhaps 1.1200-1.1250 or maybe even 1.1184 (the major Fibo on the chart) if we work that much lower. I prefer to see how the price action develops on the back of whatever today’s jobs report to see if the bulls can make a stand – if not, we remain in a local USD uptrend until or unless a reversal develops. As noted above, the big 100.00 area in the USD index is in play here as well.