- USD/JPY corrects sharply from two-decade highs hit this Thursday.
- The intraday corrective pullback manages to find some support near the 23.6% Fibonacci.
- The technical situation warrants a short-term consolidation before the next rally.
The USD/JPY pair has seen an intraday reversal from its highest level since February 2002 around 134.50 reached earlier this Thursday and has snapped a four-day winning streak. The corrective pullback has extended during the first half of the European session and has priced the pair to a fresh daily low, around the 133.40-133.35 area in the last hour.
A softer tone around US Treasury yields kept dollar bulls on the defensive and acted as a headwind for the USD/JPY pair. Additionally, overbought conditions on the daily chart prompted investors to take profits from their bullish positions. However, a nice rebound in US stock markets weighed on the safe-haven Japanese yen.
In addition, the wide divergence between the monetary policy of the Federal Reserve (aggressive) and that of the Bank of Japan (ultra-loose) helped to limit the losses of the USD/JPY pair. The pair found some support near the 23.6% Fibonacci of the last leg higher at 129.51-134.56, around the 133.30 area, which should now act as a key point for investors.
If a follow-through of the selling takes place, leading to a break of the 133.00 level, the 38.2% Fibonacci support near the 132.65-132.60 area will be exposed. If such support is not defended, the USD/JPY could drop towards the 132.00 level, or the 50% Fibonacci, which if broken decisively should pave the way for a deeper corrective decline.
On the other hand, the 134.00 level could now act as strong immediate resistance ahead of the daily high around 134.50. Sustained strength above this region should allow the USD/JPY pair to reclaim the psychological 135.00 level and test the 2002 high near the 135.15 region. That said, the overbought technical indicators warrant some consolidation before the next move higher.
USD/JPY 4 hour chart
-637903630177554140.png)
USD/JPY additional levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
