USDJPY seems to be having trouble sustaining its gains past the 109.50 minor psychological level, opening the case up for a quick retracement. 

Price appears to have pulled back to the 38.2% Fibonacci retracement level on the 1-hour forex time frame.

A deeper correction could last until the 61.8% Fib level, which is near the 109.00 major psychological handle and the simple moving averages. The 100 SMA is still moving above the 200 SMA for now, indicating that the uptrend is still valid.

Stochastic is moving down though, reflecting a pickup in short-term selling momentum. MACD is on middle ground but is also moving down, confirming that bears might be in control of price action for now.

A break below the 109.00 handle could indicate that a longer-term correction might take place, possibly until the 108.50 minor psychological support zone. Going long at 109.00 with a stop at 108.50 and a target of new highs at 110.00 could yield a simple 2:1 return-on-risk for a short-term trade.

Event risks for this trade include data from Japan (household spending, retail sales, industrial production, unemployment rate, and Tankan surveys) and the upcoming US NFP release on Friday.

By Kate Curtis from Trader’s Way