USDJPY Ready to Resume Selloff? – Jan 9, 2015

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USDJPY Ready to Resume Selloff? - Jan 9, 2015

USDJPY Ready to Resume Selloff? - Jan 9, 2015

USDJPY recently made a sharp selloff before retracing to the 119.50 minor psychological resistance. This lines up with the 61.8% Fibonacci retracement level, which might continue to keep price gains in check.

In fact, a short-term double top pattern can be seen on the 1-hour time frame, indicating that the corrective wave is already over. Price has already broken below the neckline and is showing downside momentum.

USDJPY Forex Setup

Stochastic is almost in the oversold area though, which means that selling pressure might fade. If so, USDJPY could head back to the previous resistance near the 121.00 major psychological level.

On the other hand, continued selling momentum could lead to a test of the previous lows around the 118.00 major psychological level. Earlier in the week, the FOMC minutes indicated that the US central bank isn’t ready to hike rates in the first quarter of the year. Nonetheless, the minutes were optimistic on the domestic economy, citing sustained improvements in hiring and spending.

Event risks for this USDJPY trade include the release of the NFP report in today’s New York trading session. Analysts are expecting to see a 241K gain in hiring for December, which is weaker compared to the previous month’s 321K increase. This might still be enough to bring the jobless rate down from 5.8% to 5.7% in the same month, as upward revisions are also expected.

Stronger than expected NFP data could lead to more gains for USDJPY as traders expect tightening moves from the Fed sooner rather than later. On the other hand, weak data could lead to a USDJPY selloff and a potential break below the 118.00 major psychological level.

The path of least resistance is to the upside though, as US data has been impressive lately. However, this could mean that market expectations are higher than what the consensus suggests.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.