New trading week the currency rate stared in a limbo between the 200-hour from the bottom and a combination of the weekly PP, the 55- and 100-hour SMAs from the top. Such neutral movement reflects anticipation of the Bank of Japan Policy Rate announcement. But since there is high probability that the will left the unchanged, the pair is not expected to act unpredictably.
Such assumption is partially supported by presence of two extremums, which have already forced the rate to make a rebound more than once. The first is located near the 114.30 mark, while the other at the 113.34 level. A breakout through one of these barriers is likely to follow after the FOMC Statement, which will be delivered on Wednesday.
On Tuesday, the Bank of Japan left the interest rate, target inflation and core inflation forecast unchanged. In other words, they still amount to -0.1%, 2% and 1.8%. However, since this decision was widely expected, the Yen did not gain much value against Dollar. In fact, it stuck at the weekly S1 at 113.13.
However, this correction is likely to last only until release of the American data. Depending on the actual figures the pair might either surge to the combined resistance set up by the 200-, 100- and 55-hour SMAs near 113.60 or slip further to the weekly S2 located at the 112.58 level. From daily perspective, the pair is expected to start gradually moving in the southern direction, as previous two days marked a long awaited breakout from the rising wedge formation.
As it was expected, a release of positive consumer sentiment data elevated the pair to the 113.70 mark, which represented an approximate location of different moving averages.
During this trading session the exchange rate most probably is going to climb even higher amid the US labour data release and the subsequent Fed meeting. If that is the case, the pair is likely to break through resistance located between the 114.25 and 114.35 marks and try to reach the July 2017 maximum at 114.50.
Generally, this advance is expected to have limited effect, as two days ago the pair made breakout from a long-term rising wedge formation. From this perspective, the Yen is expected to start slowly recovering against the Dollar in the nearest future.
As the FOMC Meeting did not bring any unexpected news, the surge of the rate was limited. In other words, the pair once was stopped by resistance barrier at the 114.24 level. The fully-fledged rebound did not happen as well, as the 55-, 100- and 200-hour SMAs together with the weekly PP formed a strong support level. As a result, the pair found itself in a limbo between the 114.24 and 113.74 marks.
Until the new Fed Chair announcement, the pair is expected to continue to move horizontally. If President Trump chooses Professor Taylor, bulls might try to elevate the rate not only to the weekly R1 at 114.34 but also to the July 2017 maximum at 144.50. If President Trump nominates Governor Powell, bears are likely to drag it down towards the monthly PP at 113.25.
Contrary to expectations, none of the yesterday’s events, including disclosure of some insights about the new tax reform, created an impulse strong enough to force the pair to make a breakout from the rectangle pattern.
Moreover, expectations of the upcoming release of information about the state of the American labour market led to formation of a minor symmetrical triangle pattern.
A sharp plunge looks unlikely, as the southern side is reliably protected by a combination of the 100- and 200-hour SMAs together with the weekly PP at 113.79. On the other hand, a resistance area between the 114.25 and 114.35 levels managed to neutralize surge of the rate more than once in the past.
Nevertheless, if the employment change appears to be really positive, traders with bullish outlook are likely to use this occasion to try to elevate the pair to the July 2017 maximum at 114.50.
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