Summary:

• USDJPY probing trendline from summer of 2015
• Risk-on sentiment and USD recovery aiding the pair
• US inflation data due out on Thursday

We noted yesterday that 3 USD pairs were testing key levels as the buck threatened to break down against the EUR, NOK and TRY but now less than 24 hours later the greenback is looking to make a break to the upside against the JPY. The USDJPY has enjoyed a good move higher in recent months after making a low of 104.65 back in March but the cross has now reached a potentially crucial resistance level. 

 USDJPY is probing a near 3-year trend line which now coincides with the YTD highs around 111.40. This could be a key resistance zone to watch going forward. Source: xStation

A falling trendline going back to the summer of 2015 when the market was above 125 is now being tested once more, with numerous previous tests seeing sellers step in and price turn lower. Furthermore the year-to-date high of 11.39 is now also close by and the confluence of these two factors heighten the importance of how the market reacts here. A clean break and daily close above 111.40 would open up the possibility of further gains with previous highs around 114.75 a possible target. However, unless this occurs then the level will be respected and price could come back under pressure and see some of the recent gains handed back. 

 The market is showing some negative divergence around a possible double top at 111.40 and unless the market can make a decisive break above here then the rising trendline from March’s low could be tested. Source: xStation

There’s little by the way of data due out this afternoon that could effect this market with the JOLTS release at 3PM the only one of note. With indices such as the US500 also near key resistance around 2805, how equities perform in the upcoming US session could prove important. Looking further ahead, Thursday’s CPI release is arguably the biggest event of the week for the buck and a more in-depth preview of this event can be found here.