I’m not seeing top-tier reports scheduled during early London trading, so I’m setting my sights on USD/JPY possibly reacting to Uncle Sam’s GDP release.

That’s right, USD/JPY is showing a short-term opportunity right now!

Before we talk setups, though, read up on the top headlines that dominated the markets in the last couple of hours:

Major Forex Pairs Price Performance from MarketMilk

Major Forex Pairs Price Performance from MarketMilk

  • Fed’s Clarida sees brighter economy in 2021, but he’s not worried about inflation
  • New Zealand government forces central bank to include housing in rate setting
  • RBNZ governor says inflation target needs to be met before tightening
  • New Zealand business confidence dips slightly in February
  • Australia private capex climbs 3.0% in Q4
  • Oil prices hit 13-month highs on tighter supplies, Fed assurance on low rates
  • Asian shares jump after Powell nixes rate hike fears
  • Dollar languishes near 3-year lows as Fed stokes reflation bets

Upcoming Potential Catalysts on the Economic Calendar:

  • Germany’s GfK consumer climate at 7:00 am GMT
  • U.S. preliminary GDP at 1:30 pm GMT
  • U.S. core durable goods orders at 1:30 pm GMT
  • U.S. initial jobless claims at 1:30 pm GMT

What to Watch: USD/JPY

USD/JPY 1-hour Forex Chart

USD/JPY 1-hour Forex Chart

Dollar bears got busy during the Asian session after Fed Chairman Powell confirmed talks that the central bank won’t step in to taper or tighten its easy policies even if inflation ticks higher.

USD/JPY not only got rejected at the 106.00 major psychological area, but it’s also currently testing double top “neckline” on the 1-hour time frame.

If the anti-dollar vibes extend to the London session, or if the second U.S. GDP reading prints much weaker than the 4.1% growth that analysts are expecting, then we could see USD/JPY extend its downswing all the way to the 105.50 mid-range support.

But if Uncle Sam’s growth comes in stronger than markets’ estimates, or if overall risk-taking takes the major yen pairs (including USD/JPY) higher, then USD/JPY could make new February highs and revisit previous support and resistance levels like 107.00 and 107.50.