USDJPY Retraces From 12-Month High, Eyes Deeper Correction
The USDJPY scored a highest daily spike since April on 31 October after the Bank of Japan (BOJ) announced their decision to keep short term interest rates unchanged at -0.1%. Despite the strong upward move to hit a 12-month high, technical setup on the USDJPY suggests that a correction to the downside is highly probable.
USDJPY is indeed in a broad uptrend since start of the year as evident in a rising channel the prices have formed. Within the rising channel, a rising wedge formation that has taken shape since September points towards a retracement in the USDJPY. This chart pattern that occurred throughout September and October signals that upward momentum is waning and that prices could reverse to the downside upon completion. A bearish divergence on the Relative Strength Index (RSI) adds validation to the view that USDJPY is bound for a retracement.
Looking ahead, we expect the USDJPY to test the 150 support level (S1) before rebounding to retest the upper resistance zone below 152 (R1). In the likely event that USDJPY retraced from R1, our technical targets will be set at 150 (S1), 148.50 (S2) and 147.31 (S3).
USDJPY is indeed in a broad uptrend since start of the year as evident in a rising channel the prices have formed. Within the rising channel, a rising wedge formation that has taken shape since September points towards a retracement in the USDJPY. This chart pattern that occurred throughout September and October signals that upward momentum is waning and that prices could reverse to the downside upon completion. A bearish divergence on the Relative Strength Index (RSI) adds validation to the view that USDJPY is bound for a retracement.
Looking ahead, we expect the USDJPY to test the 150 support level (S1) before rebounding to retest the upper resistance zone below 152 (R1). In the likely event that USDJPY retraced from R1, our technical targets will be set at 150 (S1), 148.50 (S2) and 147.31 (S3).
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