On its 1-hour time frame, USD/JPY is showing signs of retracing from its recent strong rally. The pair has just broken above the key resistance level around the 102.50 minor psychological level, which has held for almost a month.
Since then, the pair raced up to the 103.70 area but retreated afterwards, as bulls lacked power to push the pair higher. Around that time, traders also booked profits at recent levels as they braced themselves for the BOJ interest rate decision. The Japanese central bank refrained from making any monetary policy changes though, much to the support of the yen.
Traders are waiting to see if the recent rebound in US hiring will translate to stronger consumer spending. The US retail sales report is up for release and it is expected to show a 0.3% gain for the headline figure and a 0.2% uptick for the core figure. The NFP came in strong for February, with a 175K increase in hiring versus the estimated 151K rise, lending the potential of a higher than expected consumer spending figure.
If that’s the case, USD/JPY might bounce back above the 102.50 handle and test its former highs at 103.70. On the other hand, a significantly weak US retail sales release might trigger a deeper selloff back to the next support zone around 101.50.
Do take note though that stochastic has been moving in the oversold region for quite some time now, indicating that sellers are already exhausted. Bulls might be waiting to jump in, but tentative ahead of any top-tier releases. Looking back further shows that USD/JPY is still in a valid long-term uptrend, as the BOJ’s monetary policy stance is more dovish relative to that of the US Fed, which has already begun to taper stimulus.
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