USDJPY is starting to move sideways on its 1-hour time frame, as resistance at the 124.25 level held. Price is now moving back to the bottom of the range near the 122.50 minor psychological support.
Stochastic is starting to climb from the oversold area, hinting that a bounce might take place. If so, price could test the top of the range once more and even push for an upside break if buying pressure is strong enough. RSI is still pointing down though, which suggests that there’s enough selling momentum to lead to a test of support before the climb resumes.
For now the 100 SMA is above the 200 SMA, suggesting that the path of least resistance is to the upside. However, these moving averages have been crossing back and forth, confirming that the range-bound behavior is likely to persist.
Earlier today Japan printed mostly better than expected economic data. The national core CPI showed a 0.1% gain instead of staying flat while the Tokyo core CPI came in at 0.1% as expected. Meanwhile, household spending surged by 4.8% versus the projected 3.5% increase while the unemployment rate held steady at 3.3%.
As for the US, only the revised consumer sentiment index from the University of Michigan is up for release. No changes are expected for the initially reported 94.6 figure but a downgrade might be negative for the dollar and possibly trigger a break of the range support.
Strong selling pressure could lead to around 150 pips in losses for the pair, as this is the height of the rectangle chart pattern. However, profit-taking is expected to take place before the end of the trading week, as markets reduce their exposure to the Eurogroup meetings over the weekend.
By Kate Curtis from Trader’s Way