USDJPY Descending Channel (July 3, 2015)

The pair found resistance at the 123.50 minor psychological level and could head back towards support at 121.50.

Stochastic is still moving up, which means that there is a bit of buying pressure left, but a downward move could show that sellers are taking control. RSI is on the move down but is starting to point up, which also suggests a possible bounce.

The short-term 100 SMA is below the longer-term 200 SMA, confirming that the downtrend is likely to carry on. However, an upside break past the channel resistance and an upward SMA crossover would be an early signal of a potential reversal.

The US printed a weaker than expected jobs report for June, as the economy added only 223K jobs instead of the estimated 231K increase. Aside from that, that May figure was downgraded from 280K to 254K while the April figure was revised down as well.

The good news is that the jobless rate fell from 5.5% to 5.3%, which is its seven-year low. However, this was mostly a result of a drop in the participation rate and a reduction in the labor force. Wage growth was also absent since the average hourly earnings figure showed a flat reading.

Meanwhile, data from Japan has recently shown a lot of improvement, particularly when it comes to spending. The Tankan surveys have also reflected gains in the manufacturing and non-manufacturing sectors, suggesting that the BOJ no longer needs to pump up its stimulus efforts.

With that, the path of least resistance is to the downside, as traders pare their bets for a September interest rate hike from the Fed and price in expectations of a neutral policy stance from the BOJ.

By Kate Curtis from Trader's Way