Sneaking a peak below support before data
The USDJPY is taking a sneak peak below what has been a floor area going back to February. That area is in the 118.22-508 region. There have been 6 or so swing lows in this area during that time. In August, traders ventured below that area on the day the Dow was down 1000 at the opening. It quickly rebounded an the very next day, the floor was reestablished.
Now with CPI (MoM -0.2%, Core +0.1%), Empire manufacturing (-8.00 vs -14.67 last) and Initial Claims (270K vs 263K) ready to be released at 8:30 AM ET, the market is tempting the data to once again come in weaker. Yesterday, retail sales, PPI and inventories all were weaker than expectations, and the USDJPY tumbled..
So technically, sellers remaining control and the break from the month long consolidation is looking to get the next push that could see the pair head below the 118.00 level. Looking at the hourly chart below, a lower channel trend line comes in at 117.95 currently (and moving lower). With not many technical levels from the daily chart (there was the quick plunge from August and before that we have to go back to Feb), traders are searching for something to define and limit risk. This might be something they look at. Having said that, IF it does go lower, the 118.22-50 will become upside risk for shorts as the pair makes it's BREAK OUT attempt from the month long consolidation.
