USD/JPY Price Melting Down ahead of FOMC, 133.60 Remains the Key

• The USD/JPY pair maintains a bullish bias despite a temporary retreat.
• Only a new lower low could activate a larger drop.
• The FOMC could be decisive tonight.

The USD/JPY price was trading at 134.43 at the time of writing. The price plunged after reaching 135.59, registering a false breakout above the 135.50 psychological level. Technically, the retreat was somehow expected after its strong rally.

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The price could back down to retest the immediate downside obstacle before resuming its uptrend. The current retreat could help the buyers to catch new longs. In the short term, the USD depreciated as the Dollar Index dropped slightly ahead of the FOMC, while the JPY appreciated as the Yen Futures rebounded.

Fundamentally, the Japanese economic data came in mixed. The Tertiary Industry Activity rose by 0.7% versus 0.8% expected, while the Core Machinery Orders surged by 10.8% even if the traders expected a 1.2% drop.

Later, the US Retail Sales are expected to report a 0.1% growth in May versus 0.9% in April, while the Core Retail Sales could register a 0.7% growth. In addition, the Empire State Manufacturing Index, Import Prices, and Business Inventories will also be released.

The FOMC monetary policy meeting represents the most important event. The FED is expected to increase the Federal Funds Rate from 1.00% to 1.50%, and it could announce more hikes in the next monetary policy meetings. The FOMC Press Conference and the FOMC Statement could bring high volatility and strong moves to all markets.

USD/JPY price technical analysis: Up channel

As you can see on the 4-hour chart, the USD/JPY pair registered a new false breakout through the ascending pitchfork’s upper median line (UML). The price action developed a minor up channel. The bias remains bullish as long as it stays above the minor uptrend line. The 133.60 level represents static support. In my opinion, only a valid breakdown below this level may activate a larger downside movement.

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From the technical point of view, the upper median line (UML) and the 135.00 psychological level represent near-term upside obstacles.

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