USDJPY is still trending higher, moving above an ascending trend line on its 1-hour time frame and gearing up for a test of support. Applying the Fib tool on the latest swing low and high shows that the 61.8% retracement level lines up with the trend line and 116.00 level.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. The 100 SMA lines up with the 50% Fib and appears to be holding as dynamic support while the 200 SMA is closer to the trend line and 61.8% Fib level.
Stochastic is heading north so USDJPY could follow suit, possibly making its way up to the swing high at 118.65 from here or all the way up to the 120.00 major psychological resistance.
The BOJ monetary policy statement is coming up and traders are expecting no changes in their quantitative easing program. Back in September, the BOJ already announced its decision to shift from aiming for 2% inflation to targeting the yield curve so any details on how they plan to achieve this could weigh on the yen.
Meanwhile, the FOMC just hiked interest rates by 0.25% and projected three more increases for next year, keeping fundamentals in favor of the US dollar. Data from the US was weaker than expected yesterday, as the flash services PMI posted a surprise decline, but Fed Chairperson Yellen had a few more upbeat remarks on the labor market.
Remaining releases from the US economy this week are the new home sales and final GDP reading for Q3. Another batch of upbeat readings could lead to more gains for the dollar. No other reports are due from Japan for the next few days.
By Kate Curtis from Trader’s Way