USDJPY is trading in the green in today’s Asian session. As of this writing, the currency pair is at 107.69, up from its opening price at 107.56. Technicals suggest that USDJPY has room to trade higher ahead of Fed Chairman Powell’s speech and the much-anticipated June labor market report.
Later today, the head of the Federal Reserve will appear in front of the House Financial Services Committee. Along with Treasury Secretary Steven Mnuchin, Powell is expected to talk about his outlook for the economy. He and Mnuchin are also expected to talk about the results of their efforts to support growth amid the coronavirus pandemic and what their plans are.
During Powell’s testimony, legislators will also likely ask questions which could lead Powell to provide hints on the future of the Fed’s monetary policy. If he suggests that the Fed may soon ease policy even further or talk about the possibility of negative rates, USDJPY could weaken. Meanwhile, if he sounds optimistic, the dollar could rally.
This week is also going to be a volatile one for the US dollar with the June NFP report scheduled on Thursday. It is expected to print at 3.037 million jobs for the month and the unemployment rate is seen to tick lower from 13.3% to 12.4%. Meanwhile, average hourly earnings is seen to post a 0.8% downtick.
On the 4-hour time frame, it can be seen that USDJPY has been making higher lows after a series of lower lows. Consequently, an inverse head and shoulders chart pattern has formed. When you enroll in our free forex trading course, you will learn that this is considered as a bullish reversal indicator. Because USDJPY is already trading above the neckline resistance at 107.45, it could mean that there may be enough buyers in the market. We could soon then see the currency pair rally up to its June 5 highs at 109.84.
On the other hand, if there are enough sellers to push price below its recent low at 106.79, it may invalidate the inverse head and shoulders pattern. This can indicate that there is still enough bearish momentum. Should this happen, we may soon see USDJPY fall to last week’s lows at 106.06.