The USD/JPY pair dropped in the short term but the bias remains bullish. As you already know, the price crashed on Friday after Japan’s intervention in the FX market. Still, the sell-off was only temporary.
Fundamentally, the Japanese BOJ Core CPI rose by 2.0% exceeding the 1.9% growth expected. On the other hand, unfortunately for the USD, the US economic figures came in worse than expected today. The CB Consumer Confidence dropped from 107.8 to 102.5 far below the 105.9 expected. In addition, Richmond Manufacturing Index, HPI, and S&P/CS Composite-20 HPI reported poor data.
Tomorrow, the BOC is expected to increase the Overnight Rate from 3.25% to 4.00%. This is seen as a high impact-event and could bring action also in this market.
USD/JPY Minor Flag!
As you can see on the H1 chart, the rate registered only false breakdowns below the uptrend line. Actually, it has registered a false breakdown with great separation also below 145.90 static support as well.
Now, it has developed a minor flag pattern after failing to stabilize above the weekly pivot point (148.58).
Staying above the uptrend line and making a valid breakout through the pivot point of 148.58 and above the minor flag’s resistance may signal a new leg higher. This is seen as a long opportunity, and the R1 (151.00) is seen as a potential target.
Only a valid breakdown below the uptrend line could invalidate the upside scenario and could signal a larger corrective phase.
The material has been provided by InstaForex Company – www.instaforex.com