On the daily chart below, we can see that long falling channel has been broken after the strong NFP report and the price is now targeting the resistance at 134.50. The moving averages are now pointing north and the red long period moving average acted as support for the pullback.
We can also see that the entire channel was diverging with the MACD and given the current repricing in interest rates expectations we may see a big correction all the way up to the 142.17 level where we can also find confluence with the 61.8% Fibonacci level. The upcoming economic data will drive the ebb and flow of the market.
On the 4 hour chart below, we can see that after breaking out of the channel, the price pulled back to the nearest swing support level at 130.53 where we had also the 50% Fibonacci retracement level for further confluence.
We can see that there was also a spike lower to the 61.8% Fibonacci retracement and the 130.00 level. That was a kneejerk reaction to a report that Kazuo Ueda will be the next BoJ governor.
This is because in the past Ueda had hawkish comments on BoJ policy, and some short term traders/algos interpreted that as a sign for an upcoming change in monetary policy.
The USD/JPY is mainly driven by US long term yields though and those have been surging as the market repriced interest rates expectations. The next target looks to be the resistance at 134.50 where we can also find the 127.2% Fibonacci extension level.
On the 1 hour chart below, we can see that there’s a divergence going on between the price and the MACD. This is a signal of a weakening buying momentum and we may see a pullback before another leg up.
The support level for the retracement should be the 131.82 level as we can see it held the price quite well both on the upside and on the downside. Today’s Retail Sales report may give us some movement as a beat to the expectations should lead to further upside and a miss should give us the pullback to 131.82.
