- USD/JPY has touched the top of a multi-year ascending channel.
- You are likely to face greater resistance and be at greater risk of reversal.
- The RSI threatens to break out of the overbought zone and a hanging man candlestick pattern portends pessimism,
He USD/JPY has reached the top of an ascending channel it has been in since early 2023. Although it is in an uptrend on all time frames, there is a growing risk that it is about to correct downwards.
USD/JPY Daily Chart
The top of the channel will present resistance to the bulls, acting as a barrier for them to push the price higher.
The USD/JPY printed a bearish “hanging man” candlestick pattern on Wednesday, July 3 (shaded rectangle in blue) and this is further evidence that a reversal may be developing. A “hanging man” pattern develops when a candlestick forms a peak with a small body near its high and a long wick below.
USD/JPY Daily Chart
If Thursday ends as a bearish red candle, it will provide confirmation of a short-term reversal.
The RSI momentum indicator is currently at 69.88. It is breaking out of the overbought zone. If it closes below 70 – as seems likely – it will provide a sell signal and further evidence of a short-term reversal.
The resulting pullback will likely fall to support around the 50-day simple moving average (SMA) at 157.23. This has provided support on several occasions during the USD/JPY uptrend. A break below 160.26 would add confirmation that the price could reach the downside target.
On the other hand, a decisive break above the channel top would invalidate the bearish assumption and signal an upside move, perhaps initially to 164.00. However, the bullish momentum beyond that level is unlikely to sustain for long.
A decisive breakout would be one accompanied by a long green candle that clearly breaks the channel line and closes near its high, or three green candles in a row breaking above the channel line.
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.
