The US Dollar (USD) extended downside movement against the Japanese Yen (JPY) on Thursday, threatening the long term triangle formation on the daily chart. The sentiment remains neutral; a breakout through the triangle will provide clear direction to the pair.
As of this writing, USD/JPY pair is being traded near 101.73. A support can be noted around 101.40, the lower trendline channel as demonstrated in the following chart. A break and daily closing below the trendline support could spur a renewed selling pressure, validating a dip towards the 100.00 milestone.
On the upside, the pair is expected to face a hurdle near 102.07, the 61.8% fib level ahead of 102.33, the trendline resistance. A daily closing above the channel resistance will validate fresh rallies above the 103.00 handle.
The Ministry of Internal Affairs & Communications will release the Japan’s inflation report tomorrow. According to the median projection of different economists, the inflation remained 2.6% in May as compared to 3.4% in the same month of the year before. Generally speaking, higher inflation is considered positive for the developed economies like Japan, so a worse than expected actual outcome will be seen as bullish for USD/JPY and vice versa.
Japanese government will also release the unemployment rate figure tomorrow. According to the average forecast of various analysts, the rate of unemployment in Japan remained 3.6% in May as compared to the same rate in the month before, better than expected actual outcome will be seen as bearish for USD/JPY and vice versa.
Keeping in view the overall technical and fundamental outlook, buying or selling the pair on a breakout through the daily triangle formation appears to be a good strategy in the long run, the trade should however be stopped out on a daily closing back inside the triangle as described above.