USD/JPY Forex Technical Analysis – Cautiously Bullish Trade Ahead of Fed Minutes

The Dollar/Yen is drifting lower early Wednesday after hitting its highest level since Dec. 20, the previous session. The price action likely reflects position-squaring before releasing the Fed’s last meeting minutes at 19:00 GMT.
Traders hope the minutes offer strong clues as to how high officials are projecting interest rates will go after recent data showed stronger-than-expected U.S. employment and consumer prices.
Ahead of the minutes and based on last week’s comments from Fed officials, the market believes the U.S. central bank is likely to keep raising interest rates for longer than was previously forecast in its bid to tame inflation.
At 03:57 GMT, the USD/JPY is trading 134.903, down 0.120 or -0.09%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $69.04, down $0.41 or -0.59%. On Tuesday, the USD/JPY spiked to a two-month high because of strong U.S. economic data.
Business activity in the United States in February unexpectedly rebounded to an eight-month high, increasing to 50.2 from a final reading of 46.8 in January, according to a survey. A PMI reading over 50 indicates expansion.
The main trend is up according to the daily swing chart. A trade through 135.227 will signal a resumption of the uptrend. A move through 129.814 will change the main trend to down. The nearest support is a short-term retracement zone at 133.992 to 132.700. The closest resistance is a main top at 138.173, followed by a long-term 50% level at 139.586.
Trader reaction to 135.023 is likely to determine the direction of the USD/JPY on Wednesday.
Bullish Scenario
A sustained move over 135.023 will indicate the presence of buyers. Overtaking 135.227 will indicate the buying is getting stronger. This could create the momentum needed to challenge the next main top at 138.173.
Bearish Scenario
A sustained move under 135.023 will signal the presence of sellers. The first target is 133.992. Taking out this level could lead to a test of 132.700. If this fails, look for the selling to extend into 131.227.

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