USDJPY appears to be having trouble sustaining its gains past the 110.00 major psychological resistance, as a double top pattern has formed on its 4-hour time frame. 

Price is currently testing the neckline around the 108.00 handle.

A break below this level might confirm that a selloff is in the cars, possibly around 200 pips in height, which is the same as the chart formation. Take note though that stochastic is already in the overbought area, indicating that a bounce back to the 110.00 resistance is possible. MACD is also hinting at a possible pickup in buying pressure.

A downside break from the neckline could lead to a drop to the next support area at the 106.00 major psychological level. Near-term support can also be found at 107.00-107.50, which acted as previous resistance and is near the 200 simple moving average.

Event risks for this trade include the release of the FOMC meeting minutes, which could show if policymakers are starting to draft an exit strategy and when they plan to implement this.

By Kate Curtis from Trader’s Way