USDJPY Triangle Support (Mar 22, 2018)

USDJPY is still inside its triangle consolidation pattern and is testing support at the 105.60 level. A bounce from this area could lead to another test of resistance at 106.30 or a break higher.

However, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This suggests that support is likely to break or that resistance would probably hold. The 100 SMA dynamic resistance is also around the top of the triangle.

Stochastic is heading south, also indicating that bearish pressure is present, but the oscillator is nearing oversold conditions and might be ready to turn higher to draw buyers back in.

The Fed hiked interest rates by 0.25% as expected in their latest policy statement but dollar bulls seemed disappointed over the lack of changes in the dot plot. Although GDP forecasts for this year and the next were upgraded and a couple of CPI estimates also revised higher, policymakers are still projecting three hikes this year versus expectations of four.

Economic data from Japan has been weaker than expected today, though. The flash manufacturing PMI fell from 54.1 to 53.2 instead of improving to the estimated 54.3 figure.

Only medium-tier reports are due from the US next, namely the flash manufacturing and services PMIs. Not much change from the earlier reading is eyed, and disappointing reports could cast further doubts on Fed tightening plans.

By Kate Curtis from Trader’s Way