USD/JPY Technical Analysis: 100-day MA support is being put to test ahead of the Fed

The USD/JPY bulls need to defend the 100-day moving average (MA) on a daily closing basis, else a deeper drop to levels below 110.00 (psychological support) could unfold in January.

Daily chart

As seen above, the pair has charted bullish higher-lows along the 100-day MA in the last nine months. As a result, a daily close below that level would imply a bullish-to-bearish trend change - the rally from the March low of 104.63 has ended and the bears have regained control.

The pair will likely close well below the 100-day MA if the Fed drops a strong hint of a rate hike pause in 2019.

However, if the Fed sounds less dovish-than-expected, then the dollar bulls will likely make a strong comeback.

It is worth noting that the investors are currently pricing in a single rate hike for 2019 and hence would fall behind the curve if the central bank forecasts two rate hikes in 2019.

Trend: Bearish below 100-day MA