USDJPY may be due for a downtrend as the pair recently broke below the rising trend line on the 1-hour time frame and SMAs are crossing down. 

 Price pulled up from the 118.00 support zone to the area of interest at the 119.00 mark, which might hold as resistance.

Stochastic is indicating a pickup in selling pressure, as the indicator is moving down from the overbought area. At the same time, the short-term 100 SMA seems to be crossing below the 200 SMA, which could be a sign of a reversal. MACD is also moving down and reflecting a return in bearish dollar momentum.

With that, USDJPY could test its recent lows at 118.00 or perhaps create new lows if sellers are strong enough. Shorting at market with a stop above the 120.00 handle or broken trend line and aiming for the 117.00 area of interest could yield a 2:1 return on risk for a short-term trade.

Bear in mind though that data from Japan has mostly been lower than expected this week while data from the US has continued to impress. The BOJ is more likely to ease monetary policy again while the Fed is already on track to hike interest rates sometime next year. However, these biases have long been priced in and traders might be keen to book profits on their long USDJPY positions until the end of this year.

Event risks for this USDJPY trade today include the release of US PPI figures and the University of Michigan consumer sentiment index. Headline producer prices could dip 0.1% due to the recent drop in oil prices while core producer prices might see a 0.1% uptick. Consumer sentiment is likely to have improved in November, with the index slated to climb from 88.8 to 89.6.

By Kate Curtis from Trader’s Way