USDJPY is on a strong uptrend, moving above a rising trend line on its 1-hour chart and just breaking above a resistance area at 121.50. Price made a strong rally following the NFP release on Friday but appears to be showing some signs of a correction.
Using the Fib tool on the latest swing high and low shows that the 61.8% retracement level lines up with the rising trend line and area of interest at the 121.50 minor psychological level. This is also near the 200 SMA, with the 100 SMA closer to the 50% Fib at 122.00.
Stochastic is heading south, which means that buyers are taking a break and letting sellers take over. RSI is also moving down, reflecting the presence of bearish pressure.
USDJPY Fundamental Factors
The strong jobs release last Friday is keeping dollar bulls in the game, as the data supports a Fed rate hike in December. The economy added 271K jobs versus the projected 179K increase and the previous 137K rise, enough to bring the jobless rate down from 5.1% to 5.0%.
Event risks for this trade include the release of US retail sales data on Friday, with analysts expecting to see a 0.3% rise in the headline figure and a 0.4% gain for the core figure. Also due that day is Japan’s revised industrial production data and tertiary industry activity index.
For now, the path of least resistance for this pair is to the upside since the US economy is much closer to tightening while Japan could use a little more easing. Risk sentiment could still push price action around, with any downbeat readings from the US likely to keep the correction going.
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