USD/JPY Forecast: long-tailed inside days indicate scope for a rally, eyes US wage growth
- Back-to-back long-tailed inside day candles signal the USD/JPY pair could be eyeing a bullish move.
- Better-than-expected US wage growth figure could lift USD/JPY to 110.00.

Having defended the key 50-day moving average (MA) for three straight sessions, the USD/JPY pair looks set for a bullish move, the technical charts.
Daily chart
The pair created inside day on Wednesday and Thursday - a reversal pattern which indicates the pullback from the recent high of 111.40 has ended. A positive follow-through today would confirm bullish revival.
That said, the pair is more likely to see a positive move today as the long tails/lower shadow of last three daily candles indicates the dips below 108.82 (38.2 percent Fibonacci retracement) and the dips to ascending (bullish) 50-day MA was possibly met by fresh bids.
Further, the previous three candles also show the pair has created higher lows (bullish setup) pattern along the rising 50-day MA.
The price action adds credence to the 50-day MA and 100-day MA crossover confirmed on May 29 and the bullish price-relative strength index (RSI) divergence seen in the 4-hour chart and could yield a rally to immediate resistance 109.26 (4-hour 200 MA).
A convincing move higher to 110.00 could be seen if the US wage growth number betters estimates. The data, due at 12:30 GMT is expected to show the average weekly earnings rose 0.2 percent month-on-month in May vs. 0.1 percent rise seen in April. The annualized figure is seen printing at 2.7 percent vs 2.6 percent previously.
Meanwhile, the pair could drop below the weekly low of 108.11 if the US wage growth number disappoints expectations by a big margin, pushing the probability of a June Fed rate hike below 70 percent. History shows the Fed will go ahead with a rate hike only if the probability stays above 70 percent.
Note - A close below 108.64 (May 4 low) would confirm a bearish-to-bullish trend change (rally from March 29 low of 104.63 has ended and the bears have regained control) and open doors to a deeper sell-off to 107.21 (61.8 percent Fibonacci retracement) - 107.00 (psychological level).
Author

Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
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