Recent macroeconomic statistics, released in Japan, indicated that GDP declined in the third quarter. The country is facing a slowdown both in its economy and inflation.
Tomorrow, the Bank of Japan announces its interest rate decision. The Regulator is likely to be pressed to add more stimulus to support the country's economy that will affect the national currency.
Today, attention needs to be paid to Fed officials speeches and to the publication of FOMC minutes, which will shed light on the future US interest rate policy. Positive forecasts for a rate hike may strengthen the USD and the USD/JPY pair.
Support and resistance
Since the beginning of the month, the USD/JPY pair has strengthened by 300 points and approached the resistance level of 123.70 (23.6% Fibonacci).
The price is trading within an upward channel on the daily chart with the upper border close to the levels of 124.00, 124.50 the breakout of which would lead to a growth towards 125.00, 125.65 (year highs).
A fall in the pair is limited by the support level of 122.50 (38.2% Fibonacci). If the price breaks it down, a decline would continue to the levels of 122.00, 121.50 (EMA200 on the 4-hour chart and 50.0% Fibonacci).
OsMA and Stochastic on the daily and weekly charts recommend long positions. On the 4-hour chart, they are turning to short positions, indicating a possibility of a correction to the level of 122.50.
Support levels: 123.00, 122.50, 122.00, 121.50.
Resistance levels: 123.70, 124.00, 124.50.
Long positions can be opened after the breakout of the level of 123.50 with targets at 124.30, 125.00 and stop-loss at 123.10.
Short positions can be opened below the level of 123.00 with the target at 122.40 and stop-loss at 123.30.