USD/JPY is showing signs of breaking down the descending triangle forex trading chart pattern on its daily time frame. The forex trading pair has been making lower highs and finding support near the 101.00 major psychological level.
So far, data from Japan has surpassed expectations but it remains to be seen whether the recently implemented sales tax hike will weigh on spending and growth. As for the US, data has been mixed with retail sales printing weaker than expected results last week and inflation figures coming in mostly in line with expectations. Housing reports have printed strong figures, as both housing starts and building permits surprised to the upside.
USD/JPY Forex Trading Forecast
A break below the 101.00 level or the bottom of the descending triangle forex trading chart formation might lead to more losses for USD/JPY, possibly leading to a multi-hundred pip selloff. The pattern is roughly 400 pips in height, which means that the drop could be of the same size.
On the other hand, an upside breakout is still possible if the BOJ shows an inclination for further easing or if the Japanese economic data starts showing signs of slowing down. Similarly, upbeat data from the US or hawkish FOMC rhetoric could lead to a rally for USD/JPY in the next forex trading sessions.
If data keeps coming in line with expectations though, more consolidation could be seen as forecasts have already been priced in long enough. Do take note though that risk sentiment is weaker these days, as geopolitical risk is weighing on higher-yielding currencies. A forex trading breakout in either direction could show which between the US dollar and the Japanese yen is the preferred safe haven currency of traders.
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