Last Friday, the USD/JPY fell after the NFP report, which showed a rebound in jobs created in April compared to March. The reaction in USD/JPY was not telling of its direction for this week, but we can monitor how the market eventually deals with this reaction to form a technical assessment.
The 1H chart shows the strong bearish engulfing candle that fell from about 120.20 to 119.40. Price then stabilized and was unable to recoup. So there is a slight bearish bias, but the fact that the RSI was unable to break back below 40 shows that the prevailing bullish momentum just ahead of the NFP release is still in play.
Let’s keep it simple and use this reaction candle as a range. Basically, if price breaks above 120.25, the pressure should be on the 120-50-120.85 consolidation range area, with risk of extending to the 122 high on the year.
Otherwise, a break below 119.40 should put pressure back towards the 118.30-118.50 area. Because the FOMC is relatively more hawkish than the BoJ, we should respect the support here more than the 120.50-120.85 resistance.
Now, if there is a break below 118.30, then we should look for a slide towards the 115.56-116 area, which is the support for a multi-month consolidation range.
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