USD/JPY has been consolidating inside a symmetrical triangle for almost an entire month, as traders are torn in picking clear forex signals for this pair. However, the bleak US GDP release has resulted in a sharp downside break from triangle support and indicated that the next trend could be downward.
Stochastic is headed lower, indicating that selling pressure is still present. Price has already made its retest of the broken support level and resumed its drop, indicating that sellers are in control. A break below the previous lows around 101.65 could be a sign of further selling momentum.
Shorting at 101.50 with a 50-pip stop back inside the triangle could offer a strong return on risk if one aims for roughly 150 pips, which is approximately the same height as the chart pattern.
USD/JPY Forex Signals
Earlier this week, the US economy saw a huge downward revision to its GDP to show an economic contraction of 2.9% from the initially reported 1.0% drop in growth. This marks the worst contraction since the first quarter of 2009 when the global financial crisis was still weighing on the US economy.
Data from Japan has been more or less stable, with the expected fluctuations from the April sales tax hike just starting to kick in. For now, the BOJ has insisted that the economy remains resilient and that no easing measures are necessary. However, a Goldman Sachs report released today showed that the financial institution is expecting that the BOJ will ease in October to stoke inflationary pressures.
As for the Fed, monetary policy bias has been on a more cautious side this time, as Fed Chairperson Yellen declined to give a time frame on when they could hike interest rates. The Fed also downgraded growth forecasts for the year while upgrading employment and inflation forecasts.
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