the US Dollar versus the Japanese Yen (JPY) has been in a strong bullish momentum over the last few weeks. However, the current bearish candlestick patterns on the daily are indicating a potential reversal.
This is only amplified when we consider the strong resistance at 114.50-115. This resistance zone has long acted as the target for the bullish swing.
The USD/JPY showed a bearish pinbar reversal candlestick pattern on the daily chart last week. This week there was second confirmation of the potential bearish reversal when price a) closed with a strong bearish candle below the previous lows and b) closed near the daily candle low. Furthermore, there was also a break below the support trend line and divergence between the two most recent tops (purple lines on daily chart). Despite the bearish price action however, price is still at the short-term moving averages and the 23.6% Fibonacci support level which could provide a potential bullish bounce. Let’s examine the potential retracement on the 4 hour chart.
A bullish retracement towards the moving averages of the 4 hour chart could occur before price continues with its bearish reversal. The bullish retracement would be a wave B and indicate a larger bearish ABC correction towards the 38.2% Fibonacci level at 111.72. Later on price could continue to test lower Fib levels like the 50, 61.8 or 78.6% Fibonacci retracement levels.
These Fibonacci levels can, in turn, be considered potential bullish bouncing spots for more USD/JPY upside. Eventually price will need make a bullish or bearish break of the sideways range before a larger price movement can be expected, see image below.
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Many green pips,