USD/JPY’s rally seems to be losing steam as the pair can’t seem to make a break above the 97.00 major psychological resistance. Right now, USD/JPY is pulling back to the 95.00 area and looks ready to test the rising trend line on the 4-hour time frame.
Note that the trend line is in line with the 50% Fibonacci retracement level near 94.00. This is also the former resistance level, which might act as support from now on.
Stochastic isn’t in the oversold region though, which suggests that the pair could still dip lower, possibly until the 93.50 minor psychological support. If you’re planning to buy this pair, make sure you set your stop below that level.
There are no major reports due from both Japan and the U.S. today, which means that there isn’t any catalyst for a strong breakdown. The trend could remain intact, at least until the end of this trading week.
Monetary policies of the BOJ and the Fed seem to be on somewhat opposite poles for the meantime as the BOJ is favoring aggressive easing measures while the Fed has expressed its intention to withdraw asset purchases once inflation and employment pick up.
By Kate Curtis from Trader’s Way