On the daily chart below, we can see that after breaking out of the 134.50 resistance, the buyers push the price to the 138.00 handle. The recent push higher comes after the Fed Chair Powell opened the door for a 50bps hike and a higher terminal rate.
The USD/JPY pair is correlated with US Treasury yields, so when we see the market pricing in a more hawkish Fed, we can also see Treasury yields rise and ultimately push the pair higher.
The market will now look at the NFP report on Friday and if the data beats expectations, we are likely to see more upside for the pair, on the other hand, in case we get a miss, we will probably see a strong pullback.
On the 4 hour chart below, we can see that the top trendline is generally where we find sellers. So, we may expect that we will find them again leaning on that top trendline unless the US data comes out hot and the buyers just absorb any selling pressure.
After yesterday’s Powell event though, the price got a bit overextended as depicted by the distance between the price and the blue short period moving average. Generally, the price either consolidates or pulls back a bit to get things more in equilibrium.
On the 1 hour chart below, we can see that if we were to get a pullback, the price is likely to retrace back to the 137.00 handle where we can find confluence of a previous resistance now turned support, the 38.2% Fibonacci retracement level and the red long period moving average. This is where we will most likely find strong buyers positioning into the NFP report.
