USDJPY recently broke down from its range visible on the 4-hour time frame, signaling that a selloff is in order. Price seems to be in the middle of a correction to this area of interest, though, and the 38.2% retracement level could serve as resistance.
However, the 100 SMA is still above the longer-term 200 SMA so the path of least resistance might still be to the upside. If the pair breaks past the Fibs, it could be on track towards testing the range resistance at 115.00 once more.
Stochastic is indicating oversold conditions and is pulling up, indicating a return in buying pressure. Once the oscillator reaches the overbought zone and turns lower, sellers could gain the upper hand a push for a test of the swing low at 110.75.
The main event risk for the dollar is the healthcare vote in Congress, as this would be indicative of whether or not the Trump administration can be able to push its agenda when it comes to other reforms. A victory in repealing Obamacare could revive gains in the US markets and the dollar on stronger expectations of tax reform and financial deregulation.
On the other hand, being unable to repeal Obamacare would deal a large blow to confidence for the Trump presidency, leading investors to doubt if fiscal policy changes can be enacted soon. Meanwhile the Japanese yen is benefitting from both anti-dollar and risk-off flows.
Fed Chairperson Yellen also has a testimony lined up and this should provide more insight on the Fed’s hawkishness. Other policymakers have previously confirmed the possibility of seeing three rate hikes this year so similar remarks from Yellen could keep the dollar supported.