Possible USD/JPY Rising Wedge Break, 135?
The Japanese Yen is looking forward to the next week as significant economic events dominate the schedule (see below) for both the US and Japanese economies. From a US standpoint, investors will be searching for clues about the impending Fed interest rate decision, namely if Fed Chief Jerome Powell hints at a return to a 50bps increase or not. Money markets are currently trapped between the two levels (+/-30bps), and any hawkish speech might see the dollar extend its recent rally versus the yen.
Labor statistics (Non-Farm Payrolls (NFP)) are likely to be much lower than the January surprise; but, a weaker-than-expected print may not dramatically affect the long-term forecast because one data point does not form a trend. But, a miss will almost certainly result in a dollar sell-off because USD longs appear to be oversold.
The Bank of Japan (BOJ) has recently been in the limelight due to the possibility of a change away from its ultra-easy monetary policy. Although the newly elected BoJ Governor has declared that he will stick to Mr. Kuroda's forecast, another change to the range around 0% (now +/-0.5%) tied to Yield Curve Control (YCC) is possible.
The daily USD/JPY market action is on the verge of breaking a probable rising wedge chart pattern (black), which might bring the crucial 135.00 level into view. If the breakout occurs, this level may not hold for long, taking into account future support zones. The Relative Strength Index (RSI) appears to be losing positive momentum and may provide support for a bearish move.
Key resistance levels:
200-day SMA (blue)
Wedge support
Key support levels:
135.00
133.63