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Finally a pullback on USD/JPY!

Will dollar bulls continue to defend support levels or is a reversal in the works?

Before moving on, ICYMI, yesterday’s watchlist looked at a bearish channel on EUR/USD ahead of the ECB decision. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

ECB hiked interest rates by 0.75% as expected

ECB raised inflation forecasts from 3.5% to 5.5% for 2023

ECB also signaled scope for more rate hikes in upcoming meetings

ECB head Lagarde: Will go over terminal rate if needed to reach inflation target

SNB official Jordan: No comment on FX intervention but not ruling anything out

Fed head Powell suggests more aggressive rate hikes in the cards

U.S. EIA inventories post surprise build of 8.8M barrels vs. projected drop of 2.0M barrels

Chinese CPI fell from 2.7% to 2.5% y/y in August vs. 2.8% consensus

Chinese PPI slowed from 4.2% to 2.3% in August vs. 3.2% estimate

Japan’s Suzuki and Matsuno attempt to jawbone JPY

BOJ Governor Kuroda says he spoke to PM Kishida regarding FX matters

French industrial production slumped by 1.2% vs. estimated 0.4% dip

Upcoming Potential Catalysts on the Forex Economic Calendar:

ECB head Lagarde’s testimony at 9:30 am GMT
EU Economic Summit going on
Canadian employment change at 12:30 pm GMT
FOMC members George and Waller to speak at 4:00 pm GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart

USD/JPY 1-hour Forex Chart

I know the Canadian jobs report might be a good chance to trade the news today, but this correction on USD/JPY is just too good to pass up!

As you’ve likely noticed over the past months, this pair has barely looked back from its strong rally, so it has been extra challenging to catch the uptrend.

Right now, I’m seeing a neat retracement opportunity to an area of interest visible on the hourly time frame. The pair is already testing the 50% Fib that’s right smack in line with the 100 SMA dynamic inflection point.

A slightly larger pullback could still reach the 61.8% level closer to the rising trend line and the 142.00 major psychological level, which might be a better spot to hop in.

Technical indicators are giving the green light for a long play, as the 100 SMA is above the 200 SMA while Stochastic is hovering around oversold levels.

There are no major catalysts from Uncle Sam today, but I do have to keep an eye out for speeches by FOMC members Mester and Waller.

Do you guys think this textbook trend play is looking too good to be true?