USDJPY might be in for a reversal from its downtrend, as price formed a double bottom and is already testing the neckline at the 145.00 handle. A break above this resistance zone could be followed by a rally of the same height as the pattern.

The chart formation spans around 141.00 to 145.00, so the resulting uptrend could last by 400 pips. However, technical indicators are pointing to a continuation of the selloff.

The 100 SMA is below the 200 SMA to signal that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. Price is approaching the 200 SMA dynamic inflection point that might keep gains in check. In that case, USDJPY could fall back to the lows near 141.50 from here.

Stochastic is already indicating overbought conditions or exhaustion among buyers, so heading south might mean that sellers are returning. RSI also seems to be topping out and ready to head back down, so price could follow suit. Both oscillators have plenty of room to drop before reflecting oversold conditions.

USDJPY could take cues from the upcoming NFP release, as the outcome of the December 2023 jobs report could determine Fed policy expectations. Earlier on, the ADP report came in stronger than expected, hinting at a potential upside surprise in the official jobs numbers.

Also recall that the FOMC minutes highlighted the possibility of rates staying higher for longer, even though the December dot plot projections pointed to three interest rate cuts for the year. Strong average hourly earnings might mean more upside for the dollar since higher wage inflation could increase consumer price pressures.

On the other hand, weak jobs data could revive expectations for easing sooner rather than later, which could translate to downside for the dollar.