USDJPY is pulling up from its recent dive, possibly gearing up to test the broken support around the 124.00 handle. This lines up with the 50% Fibonacci retracement level and the 200 SMA, which might hold as resistance.
Stochastic is moving up, suggesting that a higher retracement might be possible. This could lead to a test of the 61.8% Fibonacci retracement level around the 124.50 minor psychological mark. RSI is also on the move higher, indicating that bullish momentum is still present.
The 100 SMA is below the 200 SMA, confirming the potential selloff and the continuation of the downtrend. Price could fall back to the previous lows around the 122.50 minor psychological level or even lower if selling pressure is strong enough. However, a break past the Fib levels might mean a continuation of the longer-term uptrend, which might pave the way for a test of the previous highs near 126.50.
USDJPY Fundamental Factors
Earlier today, BOJ Governor Kuroda clarified that he didn’t mean to spark a selloff among yen pairs when he said that the currency’s excessive gains have been corrected last week. This led to a bounce higher for most yen pairs in the early Asian trading session and could draw more momentum in the upcoming sessions.
The biggest event risk for this setup could be the upcoming FOMC statement, which might indicate whether or not the Fed is ready to tighten monetary policy this year. Hawkish remarks could mean more gains for USDJPY while cautious comments could lead to a selloff from the current levels.
Any revisions in the Fed’s economic projections could also have a strong influence on USDJPY price action. Later on in the week, the US is set to print its May CPI readings. The headline inflation figure is expected to climb to 0.5% while the core figure could show a 0.2% uptick, which would mark decent improvements from the previous month’s readings.
To contact the reporter of the story: Samuel Rae at email@example.com