- The dollar cuts losses throughout the market.
- Data from the US show that the recovery continues.
USD / JPY is in recovery mode after falling to 104.54 hours ago and trading at 104.83, the highest level since the Asian session.. The rise is behind an improvement in the tone of the dollar that is cutting losses in the market.
Data from the US showed that the expansion in economic activity continues in October. The PMI report had as an outstanding detail the better-than-expected reading in the services sector, although without greater relevance in the market.
Compared to a week ago the USD / JPY is on its way to close negative. The week chart remains bearish, although moderate runs, with low volatility, still predominate.
Technical overview
The pair has been swinging in an upward sloping channel for the last 24 hours or so. Given this week’s sharp pullback from the 105.75 region, the aforementioned channel constitutes the formation of a bearish flag pattern on the hourly charts. The setup appears to tilt firmly in favor of bearish traders.
The bearish setup is reinforced by the fact that the oscillators on the day chart maintained their bearish bias and have been struggling to gain significant traction on the shorter term charts. That said, it will be prudent to wait for a bearish confirmation before positioning for any other short-term depreciation moves.
A Convincing breakthrough in the trend / flag channel pattern support, around the 104.55 / 50 region, will set the stage for a slide towards September’s monthly lows around 104.00. Some subsequent selling should pave the way for an extension of the bearish trajectory towards the 103.10 / 103.00 area.
On the other hand, Recovery moves could continue to face stiff resistance near 105.00. The mentioned barrier coincides with the upper limit of the channel, which, if decisively broken, will nullify the bearish outlook and cause some short-term coverage movement.
A subsequent move past the horizontal support break point at 105.20 could help USD / JPY target 106.00 with intermediate resistance near 105.50.
USD / JPY 1 hour chart
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Credits: Forex Street
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