USDJPY has been moving inside a descending channel on its 4-hour time frame and is currently testing the resistance. This lines up with the 61.8% Fibonacci retracement level on the latest swing high and low, also coinciding with an area of interest at the 107.00 major psychological level.
If this holds as a ceiling, price could resume its drop to the previous lows at the 100.00 mark or onto the channel support at 98.00. The 100 SMA is below the 200 SMA for now, confirming that the path of least resistance is to the downside, but an upward crossover seems imminent.
If the moving averages complete this crossover, a reversal from the downtrend could take place, taking USDJPY up to the next area of interest at 109.00-110.00. Stochastic is on the move down, suggesting that sellers are still in control of price action, but the oscillator is nearing the oversold area to indicate bearish exhaustion. RSI is still heading south so USDJPY could follow suit.
BOJ Governor Kuroda mentioned that the central bank isn’t considering adding monetary stimulus just yet, dousing hopes for larger bond purchases in their upcoming monetary policy statement next week. This led the yen to regain ground after speculations of additional QE surfaced on PM Abe’s order to prepare a government economic stimulus program the other week.
Data from the US came in mostly stronger than expected yesterday with the exception of the Philly Fed index. Initial jobless claims, existing home sales, and the CB leading index beat forecasts. For today, flash manufacturing PMI data is up for release and an improvement from 51.3 to 51.9 is eyed, indicating a faster pace of industry expansion.
Earlier today, Japan’s flash manufacturing PMI beat expectations with a rise from 48.1 to 49.0, outpacing the consensus at 48.3 and indicating a slower pace of industry contraction.