USDJPY may be unchanged from its opening price in today’s trading, but it’s worth pointing out that technicals suggest a potential upside break soon. As of this writing, the currency pair is trading at 107.25 which is less than a pip from where it opened.
Yesterday, the Census Bureau reported that consumer spending grew by 7.5% in the month of June. Excluding volatile items, the core retail sales reading came in at 7.3%. Both numbers were anticipated to print at 5.0% and were therefore bullish for the USD. Retail sales is the primary measure of consumer spending which would suggest that the recent job growth in the US has resulted to more confidence among the population to spend.
The University of Michigan consumer sentiment report which is due later today at 3:00 pm GMT, could provide direction on USDJPY. A reading above the 79.0 forecast could help USDJPY sustain its gains. Meanwhile, a lower reading could weigh on the currency pair.
On the 4-hour time frame, it can be seen that USDJPY is testing a confluence of resistance around 107.25. For one, this price coincides with the 100 SMA. When you connect the highs of July 1, July 7, and July 14, you can see that it also aligns with the falling trend line. Reversal candlesticks have already formed which could suggest that USDJPY may soon trade lower. If sellers dominate trading, the currency pair could soon fall to 106.65 where it bottomed on July 15.
On the other hand, it’s worth pointing out that USDJPY has recently gotten rejected at a support level twice. With this, a double bottom chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is widely considered as a bullish reversal indicator. A strong close above the high of July 14 at 107.42 could effectively break the neckline resistance. If this happens, we could soon see USDJPY rally to 108.15 where it peaked on July 1.