USDJPY is currently testing an area of interest visible on its 4-hour time frame and might be due for a bounce. Resistance turned support is located at the 124.00 major psychological level and a rally might last until the recent highs at the 125.00 level or higher.
Stochastic is pointing up, suggesting that the path of least resistance is to the upside. RSI is also on the move higher while the 100 SMA is above the longer-term 200 SMA, also confirming that a rally is possible.
However, if dollar bears take control of price action, a downside break of support could take place and push USDJPY down to the next support at the 123.00 mark or until the 200 SMA support. A move below these areas could lead to longer-term declines for the pair.
USDJPY Fundamental Factors
Data from the US came in mostly better than expected recently, supporting the view that the Fed can be able to hike interest rates in September or December. However, the recent efforts by the Chinese central bank to lower the value of their currency could wind up convincing Fed officials to wait until next year before tightening.
Earlier today, Japan printed a better than expected GDP reading of -0.4% versus the projected -0.5% figure. Later on in the week, the BOJ is set to announce its monetary policy decision but no actual adjustments are expected.
Risk sentiment has somewhat favored the lower-yielding currencies like the dollar and the yen for the past few days, which suggests that this pair could react mostly to technicals in the next few days. Upcoming data from the US include the CPI, which might also indicate stronger than expected results like the PPI releases last week.
On Friday, the US will print data on personal spending and income, along with the core PCE price index or the Fed’s rumored inflation measure.
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