USDJPY looks ready to trade sideways on its daily time frame as price has bounced off the resistance around 114.25. This could put the pair on track towards its range support at 108.50.
The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. However, the gap between the moving averages has narrowed and an upward crossover appears imminent. These moving averages could hold as dynamic support as well.
Also, stochastic is dipping into oversold levels, which suggests that sellers are already exhausted. If buyers are able to take over, another test of the range resistance could take place.
Over the weekend, Japan printed a stronger than expected trade surplus of 0.32 trillion JPY versus the projected 0.21 trillion JPY figure and the earlier 0.27 trillion JPY reading. There are no reports due from Japan today so the yen could take its cue from market sentiment or bond yields.
Meanwhile, the dollar also saw strong US data on Friday, particularly in the construction sector. Building permits jumped from 1.23 million to 1.30 million, surpassing the consensus at 1.25 million, and housing starts rose from 1.14 million to 1.29 million.
Only the CB leading index is due from the US today and another strong gain could keep the currency supported. Apart from that, updates on tax reform could also impact dollar movement.
By Kate Curtis from Trader’s Way