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I’m keeping an eye on this simple technical pullback play on USD/JPY to see if the area of interest would hold.

Will buyers return soon?

Before I show you my chart setup, make sure you know all about the headlines that dominated the late U.S. and Asian session trading!

Major Forex Pairs Price Performance from MarketMilk
Major Forex Pairs Price Performance from MarketMilk

Upcoming Potential Catalysts on the Economic Calendar:

  • German final CPI at 7:00 am GMT
  • French industrial production at 7:45 am GMT
  • U.K. NIESR GDP estimate coming up

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart
USD/JPY 1-hour Forex Chart

Will the Greenback make a comeback?

The safe-haven dollar retreated against most of its forex rivals in the past trading sessions as risk appetite was in play, buoyed mostly by earnings and stimulus hopes.

This was enough to bring USD/JPY down from its 105.77 highs to the 50% Fibonacci retracement level. A larger pullback might still lead to a dip to the 61.8% Fib that lines up with an area of interest.

However, Stochastic is already pulling up to show that buyers are ready to defend current support levels. The 100 SMA is above the 200 SMA, but I’m a bit worried about the narrowing gap that hints at a potential bearish crossover.

There are no major catalysts coming up in the London session, so I’m inclined to think that technical levels would hold. Either that or traders could start pricing in expectations for the U.S. CPI report for much later!

There could be a strong case for upside surprises on the inflation front since the massive amounts of stimulus doled out in the past months likely put upside pressure on price levels.