USDJPY appears to be stalling from its recent rallies as price is approaching a long-term area of interest visible on the daily and weekly charts. Price previously broke below support at the 116.00 major psychological level, which might hold as resistance from here.
The 100 SMA is below the longer-term 200 SMA on this time frame so the path of least resistance is to the downside. However, the moving averages appear to be turning higher to indicate a potential upward crossover and a continuation of the climb.
Price is currently testing the 61.8% Fibonacci retracement level near the 115.00 handle and might be ready to turn lower and revisit the swing low at 99.00 from here. Stochastic is indicating overbought conditions and is starting to turn lower to suggest a pickup in bearish pressure.
Economic data from Japan has been slightly lower than expectations this week, with the tertiary industry activity index up by 0.2% versus the projected 0.3% gain while preliminary machine tool orders sank by 5.6%. The Tankan manufacturing and non-manufacturing readings are still up for release later on in the week, providing clues on whether or not the BOJ might need to make policy adjustments for the next week.
As for the dollar, the FOMC statement is the main event risk for the week. An interest rate hike of 0.25% is expected as the US economy is approaching full employment and has shown consistent improvements in growth and inflation. However, policymakers might caution that this would be their last tightening move in a long while and highlight the uncertainties stemming from the new US presidency.
US retail sales and PPI readings are also up for release ahead of the FOMC statement, but the dot plot projection of rate changes could steal the show for the day. Any indication that rate hikes are still possible within the next six months could keep the dollar supported.