USD/JPY has been moving sideways for the past few days as the changes in risk sentiment have been pushing the US dollar and the Japanese yen around. Bear in mind that both currencies tend to benefit from safe-haven flows as they offer lower yields and lower risk compared to other currencies.
The pair has moved back and forth between support at 101.30 and resistance at 103.20, which has been tested a couple of times in the past weeks. USD/JPY just came off a test of support recently, after the FOMC decided to push through with the taper and Yellen announced that a rate hike might take place around six months after the asset purchases end.
Right now, USD/JPY is encountering near-term resistance around the 102.30 area, despite the wave of strong US data released yesterday. An upside break from its short-term flag consolidation pattern could mean a move back to the 103.20 zone.
USD/JPY Technical Outlook
A test of 103.20 could mean a move back south if resistance holds. After all, stochastic is almost in the overbought zone already, indicating that dollar bears are about to take control of price action sooner or later. However, the indicator is also starting to reflect downward momentum by crossing down, suggesting that a selloff back to the range support might take place before the end of the week.
Japanese banks are on holiday today, which might mean quiet trading for yen pairs or vulnerability to dollar movement. As for the US economy, no major reports are lined up but several FOMC officials are scheduled to give testimonies. Confirmation of support for Yellen’s biases could lead to a stronger USD/JPY rally, which might even mean a break of rhe 103.20 resistance.
On the other hand, lack of support for Yellen’s plans could lead to a sharp selloff for this pair and perhaps a break of the 101.30 range bottom
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