USDJPY is forming lower highs connected by a new descending trend line on its 4-hour time frame. Price recently bounced off the lows at 108.73 and is pulling back to this falling resistance area.
Applying the Fibonacci retracement tool on the latest swing high and low also reveals that the 50% to 61.8% levels are in line with this trend line, adding to its strength as resistance. The 61.8% Fib near the 110.00 handle lines up with the 100 SMA dynamic resistance as well.
On the subject of moving averages, the 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that resistance is more likely to hold than to break. If that’s the case, USDJPY could revisit the lows or head much further south from here.
Stochastic is pointing up to suggest that the correction is still ongoing, but the oscillator is approaching the overbought zone to signal exhaustion. Turning lower would confirm that sellers are jumping back in.
Dollar traders are likely holding out ahead of the NFP release later this week, as leading indicators are giving mixed signals. The ADP non-farm employment change figure turned out to be a huge disappointment, hinting that the official government numbers might also disappoint.
The ISM manufacturing PMI turned out weaker than expected while the services PMI beat forecasts, although both surveys revealed growth in employment for July. The Challenger job cuts report is up for release today.
Analysts are expecting to see a gain of 895K in hiring for the month, slightly stronger than the earlier 850K increase. A downside surprise could confirm that Fed stimulus would stay in place for much longer, likely boosting risk appetite, while an upside surprise could revive taper talks.