USD/JPY appears to be topping as we get into the middle of the trading week. The 4H chart below shows price finding resistance near 120.80 several times in the past couple of weeks. This week, the Japanese Yen has been resilient and the USD/JPY fell below a support pivot at 118.86, forming a price top.
Topping: The 4H chart shows the breakdown below the support pivot as well as the 200-, 100-, and 50-period SMAs. If price climbs back above these SMAs, the bearish outlook might be invalid, and pressure could be back on the 120.80 area. However, if USD/JPY is turning bearish in the short-term, we should see resistance around 119.50 upon a pullback.
Breakout Projection: The “price top” is about 200-pips. Using this as a target projection, the breakout has the 116.80-117.00 area in sight. When looking at the daily chart, we can see that below 116.80, the next support might be around the 115.56 support pivot up to the 116.00 handle.
At the Crossroad; Broken Speedline: The daily chart also shows that USD/JPY is trading at the crossroad. Price is still above the 200-, 100-, and 50-day SMAs, while the daily RSI is holding above 40. We are in the middle of a strong bullish trend, but price action since December has flattened. Furthermore, this week’s price action has broken below a rising speedline from October.
Again, respecting both the short-term bearish price action as well as the medium and long-term bullish trend, we should look at the 116.80-117, then the 115.60-116.00 area for support.
ADP Employment Change, FOMC, NFP: The ADP Employment Change data is expected to be 227K for December, which would beat the 208K print for November. A reading below 200K might offer a strong bearish impact for the next couple of sessions, while a reading above 250K can keep USD/JPY from topping even in the short-term. We also have the FOMC minutes later during the US session. It is likely going to remind the market that the FOMC is ready to raise rates before mid-2015. If USD/JPY can’t close above 119.50 after both releases today, we have a better chance of a bearish correction ahead of Friday’s NFP.
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