USD/JPY: Ready to breakout ahead of FOMC

• The FOMC is scheduled on Wednesday at 18.00 GMT. 
• USD/JPY: the range is tightening as  the FOMC looms.

The USD/JPY is trading around 105.88, down -0.12% amid stable US yields. 

USD/JPY weekly chart. 

The Dollar-Yen has been in a bear leg since the start of the year closely following the US dollar index. The last four weeks have been a stalemate characterized by a trading range between 105.50 and 107.00 with short-lived incursions up to 108.00. The weekly RSI is attempting to climb above the 40 level but so far the bears have sold any bullish attack. The weekly MACD indicator is also suggesting that the bear trend is still well in place. The USD/JPY pair is trading below the 50, 100 and 200-period SMA which further confirms the bearish bias for now. Bears seem to have been more aggressive in the last 4 weeks as they more consistently left tails on top of bars as compared to the bulls. However, this week will likely be pivotal as we will most certainly see a rate hike from the Federal Reserve and further information on the pace of rate increases in the near future. 

USD/JPY daily chart

The daily chart of  USD/JPY is providing us with some positive divergence with both RSI and MACD as compared to the price action, which signals that the trend is stalling or might be about to reverse. But before calling the reversal we would need strong evidence from the bulls, in the form of a clear trend line breakout (red line) or a clear close above 107.00-107.50 which is the top of the trading range. In the last six days, neither the bears nor the bulls have been taking risks. Although the last six days of trading saw the price going down, the bears never managed to close a bar on the low of the day, especially on the second half of last week, when the MACD was actually going up. On the flip side, the bears will need to close below 105.00 to confirm the bear trend continuation.  Market participants are likely waiting the FOMC for unlocking the status-quo.