• The USD/JPY pair fell sharply on Tuesday after hitting resistance near ¥153, hinting at a potential double top.
• Traders eye ¥150 as key support ahead of rate decisions from the Fed and Bank of Japan this week.

The US dollar has fallen significantly during the trading session on Tuesday, with the ¥153 level offering resistance. In fact, the ¥153 level looks very much like a double top just waiting to happen, so I’m not overly surprised by this move. Furthermore, keep in mind that over the next couple of days, we will get interest rate decisions from both the FOMC in the United States and the Bank of Japan, which will have a direct influence on this pair.
 

Bank of Japan Comments

It’s worth noting that the Bank of Japan commented earlier about needing to see FX moves represent economic reality. That being said, we’ve had a bit of a spook in the market, but I do think that a pullback at this point is likely to end up being a buying opportunity, perhaps with the ¥150 level offering support. That area has shown previous support and formed a hammer about two weeks ago. In addition, the 50-day EMA is coming into the same neighborhood, reinforcing the area as potential support.
 

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All things being equal, this market continues to show a lot of volatility but remember that traders get paid to hold this pair at the end of each day, with the positive swap remaining a major driver of its direction.

Don’t get me wrong; I do believe the Wednesday session could be extraordinarily negative, but if we see a sharp drop here, I’ll be looking to pick up value closer to the ¥150 level. If we turn around and break above the ¥153 level, then the next target becomes the ¥154.50 level.

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