USDJPY Aiming for 104.00?

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USDJPY appears to have completed its retest of the broken support around the 105.00 handle and is proceeding with its selloff. The Fibonacci extension tool shows the next potential downside targets.

The 38.2% level is at the 104.50 minor psychological mark then the 50% level lines up with the swing low at 104.33. The 61.8% level is at 104.61 then the 76.4% level is close to the 104.00 major psychological mark. Stronger selling pressure could take USDJPY to the full extension at 103.60.

The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the decline is more likely to pick up than to reverse. The gap between the indicators is widening to reflect stronger selling pressure, and the 100 SMA appears to be holding as dynamic resistance.

Stochastic is already in the oversold region, though, and turning higher could confirm that buyers are ready to take over. RSI has more room to move south so selling pressure could stay on for a bit longer.

US durable goods orders data is due later today and small gains are eyed, not likely bringing much volatility for this pair. The bigger catalyst is likely the BOJ decision on Thursday, even though no actual changes are eyed.

Any shift in rhetoric could set the tone for yen price action, with dovish remarks likely to spur losses and optimistic comments possibly resulting in gains. Still, big swings in overall market sentiment could impact the safe-haven yen.

As for the US currency, the advance GDP reading due at the end of the week could also push the dollar around. A strong rebound is eyed for Q3 but a major disappointment could lead traders to dump the dollar, especially with election risk in play.

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