USD/JPY is still in correction mode from its latest move but looks ready to bounce off the nearby area of interest.
Will we see trend continuation or a breakout?
Take a look at these inflection points on the 4-hour time frame:
USD/JPY 4-hour Forex Chart by TradingView
This yen pair has formed lower highs connected by a descending trend line that’s been holding since the start of the year.
Thanks to the not-so-hawkish Bank of Japan policy announcement earlier this week, JPY has been selling off enough to take USD/JPY for a higher retracement to the 50% Fib. At the same time, stronger than expected U.S. ISM manufacturing PMI caught dollar bulls’ attention ahead of the NFP release.
Could USD/JPY go for a larger correction to the area of interest near the 61.8% level?
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the the Japanese yen and U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
The pair is already testing the 200 SMA dynamic resistance near R1 (145.15) and the 50% correction level, potentially setting its sights back down to the swing low close to S1 (141.00) if dollar selling resumes.
A larger pullback could test the former support turned resistance near the descending trend line and R2 (146.66), but keep an eye out for long green candlesticks close above this zone since those could point to a possible trend reversal.
As always, watch out for other top-tier catalysts that could impact overall market sentiment, and make sure you practice proper position sizing when taking any trades!