Market watchers are looking to trade USDJPY at the descending triangle support once more, as the pair was rejected on its latest test of the triangle resistance on the longer-term forex charts.
A bounce from the 101.25 support area could lead to another test of the falling trend line or triangle resistance, which is located at the 102.00 major psychological handle for now. However, as price has consistently been forming lower highs, it could be indicative of a buildup in selling pressure.
In that case, a downside break might be possible as the FOMC has declined to give any forecasts on when rates might be hiked. However, the minutes of their latest monetary policy meeting indicated that they are set to carry on with the taper and end asset purchases in October, and this might lead those looking to trade USDJPY to buy the pair.
Trade USDJPY Signals
US earnings have been relatively soft, also adding to selling pressure on the dollar. Meanwhile, Japan has printed poor core machinery orders and tertiary industry activity data earlier this week, also putting a bit of pressure on the Japanese yen.
Longer-term monetary policy outlook would show that fundamentals might still favor the US dollar against the Japanese yen, as the Fed is much closer to tightening compared to the BOJ. Remember that the Japanese government recently implemented a sales tax hike, which has given support for inflation but has dragged spending and production lower.
A bounce from the current levels and a test of the top of the triangle could have the possibility of leading to an upside breakout and long positions to trade USDJPY. Either way, a breakout to the upside or downside might lead to a 300-pip move, which is the same height as the chart pattern.
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