USDJPY managed to close clearly above the tough resistance of 134.35 on Tuesday before pulling back during Wednesday’s early European trading hours, boosting optimism that the bullish cycle could see further continuation ahead of the FOMC policy announcement today at 18:00 GMT.
Some profit-taking cannot be ruled out in the short term as the RSI and the Stochastics seem to have reached a peak in the overbought territory and are looking for an exit, while the advance in the MACD seems to be losing momentum. Hence, traders may behave cautiously bullish in the coming sessions.
Nevertheless, if the price slips back below the 134.35 level, the spotlight will immediately shift to the 133.17 nearby support area. Another failure here could activate fresh selling towards the previous peak of 131.34, while the 20-day simple moving average (SMA) at 130.58 could be another spot to keep a close eye on ahead of the 50-day SMA at 129.15.
Should buying pressures resume above yesterday’s peak of 135.45, the pair may run up to the 137.70 region, where the broken support trendline could act as resistance this time. If the latter proves fragile, the door will open for the 261.8% Fibonacci extension of the latest downleg at 139.15, while a steeper increase could even test the constraining upward-sloping line drawn from March currently seen at 140.70.
In brief, the short- and long-term outlook remains bullish for USDJPY. In the meantime, traders will wait for directional signals either above 135.45 or below 133.17 before taking new positions.
