USDJPY is making another test of the rising trend line support visible on its 1-hour forex time frame.

The pair has just traded around the 122.00 levels and pulled back to the 120.50 area, which is around the trend line and 100 simple moving average.

The 100 SMA has acted as dynamic support in the past and might continue to hold in the recent pullback. In addition, the 200 SMA is close to the rising trend line and might also hold as support.

Stochastic is moving up for now but is hinting at a potential return in selling pressure. MACD is also heading lower, indicating that dollar bears are in control of price action for now. The retracement might even last until the 119.50 minor psychological support, with a downside break indicating a potential reversal.

If the rally resumes, USDJPY could make its way back to the previous highs around 122.00 and perhaps go for new ones. Further gains could take the price up to the 125.00 major psychological mark, depending on this week’s set of catalysts.

For today, there are no major event risks lined up for this USDJPY trade, as both the US and Japan don’t have top-tier data due. This pair could encounter additional volatility during the release of Japan’s PPI and consumer confidence data in tomorrow’s Asian trading session or Wednesday’s U.S. retail sales release.

Producer prices are still expected to weaken in Japan, with a corresponding decline in consumer confidence. Meanwhile, the strong gains in U.S. hiring for the month of November are likely to have spurred positive spending figures, especially as the Thanksgiving holidays and early holiday shopping might’ve contributed to stronger retail sales.

By Kate Curtis from Trader’s Way