- USD/JPY has corrected after touching the top of an ascending channel.
- It has found support at a key support and resistance level and has found its base.
- The outlook remains broadly bearish in the near term, but the risk of a recovery has increased.
He USD/JPY has corrected after touching the top of an ascending channel it has been in since the beginning of 2023.
USD/JPY Daily Chart
The USD/JPY displayed a bearish Hanging Man candlestick pattern on Wednesday, July 3 (shaded rectangle in blue). The Hanging Man develops when a candlestick forms on a peak with a small body near its high and a long wick below. It was followed by a bearish day, providing bearish confirmation.
USD/JPY proceeded to sell off to the April 29 high support at 160.32, forming a price gap at the end of the down move, a possible sign of exhaustion.
USD/JPY 4-hour chart
The pair has recovered since July 8 (today) and has filled the gap in the process. It is currently trading against the resistance of the 50-period simple moving average (SMA).
Given the potential exhaustion gap that formed at the end of the sell-off, and the fact that it is in a strong medium- to long-term uptrend, there is a risk that the pair could continue to rally. Most corrections are composed of three waves and so far the bounce has only formed one full wave. It is possible that it could at least rally further, to a target at 161.40, the high of July 5, as it completes.
As things stand, the pair is technically still in a short-term downtrend which, given that “the trend is your friend”, could potentially extend as well.
A break below 160.26, the low of July 8, would provide confirmation of further downside towards a likely target at 158.73, the low of June 24.
On the other hand, a break above 161.50 would be a bullish signal, and above 161.95 (July 3 high) would establish a higher high and signal a resumption of the dominant uptrend. Such a move would likely initially reach 162.70, the top of the ascending channel, where it would again encounter resistance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
