On the
daily chart below, we can see that the big bullish wave in USDJPY stalled a few
days ago as we reached peak hawkishness and then got an unwind due to some Fed members hinting to a pause in
June. The bias remains bullish though as the price would need to break below
the upward trendline to change the trend and make the moving average to cross
downwards. Right now, we can see that USDJPY is approaching a nice support
level at 138.16 where we can also find the red 21 moving average.

USDJPY Technical
Analysis

On the 4
hour chart below, we can see that the price was already signalling weakness in
the bullish momentum as the price started to diverge with the
MACD into the
140 handle. Once we got the breakout of the rising channel and the moving
averages crossed to the downside, USDJPY just kept on falling also helped by yesterday’s
softness in the ISM Manufacturing PMI and Unit Labour Cost reports.

The
buyers are likely to lean on the 138.16 support where we can find the 38.2% Fibonacci retracement level.
However, if we get a break to the downside and the price falls more, we will
have an even stronger support near the 137 handle where we have the confluence of the
trendline and the 61.8% Fibonacci retracement level.

On the 1
hour chart below, we can see that the short-term trend is bearish as we are
making lower lows and lower highs. As long as USDJPY doesn’t break above the
downward trendline, the bearish trend remains intact. So, as highlighted
before, we have 3 different entry opportunities for the buyers:

• More
  aggressive buyers should lean on the 138.16 support and the
  38.2% Fibonacci retracement level with a defined risk just below it.
• If this
  support fails, they can try again at the upward trendline and the
  61.8% Fibonacci retracement level.
• More
  conservative buyers, may want to wait for the price breaking above the downward
  trendline to join the bullish wave and target the 142 handle.

The
sellers, on the other hand, are likely to pile in at every breakout:

• If the
  price breaks below the 138.16 support, the sellers will jump onboard to ride
  the selloff into the trendline.
• On a
  break below the upward trendline, the sellers will pile in more aggressively as
  the trend is likely to change at that point and the target will be the 127.20
  low.

The spotlight today will be
on the US NFP report, with various potential scenarios that could unfold:

• If
  the data surpasses expectations, along with higher-than-anticipated average
  hourly earnings, it is likely to increase the chances of a rate hike in June
  and perhaps even price in some probability of a rate hike in July. This
  particular scenario may raise concerns within the market regarding a possible wage
  price spiral.
• Conversely,
  if the data is positive but falls short of expectations in terms of average
  hourly earnings, it is expected to further weaken the USD, as it would not have
  a significant impact on rate expectations and could even trigger soft landing
  vibes.
• If
  the data falls short of expectations across the board, it will be viewed as
  negative news and could potentially induce risk aversion in the markets,
  leading to lower Treasury yields and more bids in JPY. Moreover, based on
  recent comments from Fed officials, we might witness the USD weakening also due
  to diminished expectations of future interest rate hikes.

This article was written by ForexLive at www.forexlive.com.