USD/JPY pulls back into resistance for potential swing trade
The US dollar has continued to face selling pressure following the collapse of Silicon Valley Bank, as traders bet that the Fed may pause their tightening cycle at next month's meeting. Whilst Fed fund futures imply a 60.5% chance of a 25bp hike (or 39.5% odds of a pause), this is quite a sudden chance considering the curve suggested ~80% chance of a 50bp hike last week.
US inflation data is released in ~14 hours and is likely to be a closely watched report, as a soft print could increase odds of a pause, weigh on the dollar and send USD/JPY lower. Yet a hot inflation print likely cements a 25bp hike and sees the dollar coup some of its losses.
Purely on a technical front, USD/JPY looks appealing for a bearish sewing trade. It has an established downtrend on the 1-hour chart, and prices have retraced higher into a resistance zone including the monthly pivot point and weekly S1 pivot. A rising wedge / bear flag is also forming, which generally breaks out in the direction of the underlying trend. A weak inflation report could likely help.
The bias is bearish beneath the recent cycle highs and for a move down to 132.
US inflation data is released in ~14 hours and is likely to be a closely watched report, as a soft print could increase odds of a pause, weigh on the dollar and send USD/JPY lower. Yet a hot inflation print likely cements a 25bp hike and sees the dollar coup some of its losses.
Purely on a technical front, USD/JPY looks appealing for a bearish sewing trade. It has an established downtrend on the 1-hour chart, and prices have retraced higher into a resistance zone including the monthly pivot point and weekly S1 pivot. A rising wedge / bear flag is also forming, which generally breaks out in the direction of the underlying trend. A weak inflation report could likely help.
The bias is bearish beneath the recent cycle highs and for a move down to 132.
