USDJPY sold off after the FOMC decision as traders booked profits off the event. As a result, resistance at the 115.25 area held and price made its way back to the range support at 112.35. If this floor holds, another bounce back to resistance could be in the cards.
Stochastic is pointing down but is already indicating oversold conditions. This means that sellers are already exhausted and that buyers could take over price action once the oscillator heads back up.
The 100 SMA is also above the 200 SMA so the path of least resistance is to the upside. This signals that the support is more likely to hold than to break, but in case bears keep pushing price down, a range breakdown could push the pair lower by around 300 pips or the same height as the rectangle.
Japanese banks are closed for the holiday today so there might not be enough volatility to trigger a break lower. There are no major reports due from the US economy but President Trump has a speech scheduled and any remarks concerning fiscal policy could still have a strong effect on US markets and overall sentiment.
The FOMC just hiked interest rates as expected last week but dollar bulls seemed disappointed that policymakers weren’t overly hawkish. Still, the central bank upgraded growth and inflation forecasts while showing room for three rate hikes this year.
As for the BOJ, there were no changes to monetary policy but the yen seems to be more influenced by bond yield performance lately. Later on in the week, the BOJ will release its meeting minutes while Fed Chairperson Yellen has a speech scheduled.
By Kate Curtis from Trader’s Way