In October, USD/JPY has been on a rollercoaster ride. It fell from the 2014-high around 110 down to 105.19. Since then it has rallied back and shifted the mode back to neutral-bullish. It is now consolidating again ahead of the FOMC event risk. Let’s take a look at the breakout scenarios.
A break above 108.40 represents a bullish continuation scenario. If this occurs after the FOMC does what is expected – completely remove QE, and keep the similar tone for forward guidance, then we should expect some pullback. However, staying above 108.00 would maintain the bullish outlook toward 110. If USD/JPY instead falls below 107.60 it starts the bearish continuation process, which would strengthen with a break below 107.40. If we get a pullback, see if the 107.50-60 area can now turn into resistance. If so, the USD/JPY is heading back down towards the 105.19 low on the month with risk of further downside.
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