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  • The USD/JPY pair could approach and reach the uptrend line after failing to stay above the R1.
  • A valid breakdown below the uptrend line could activate a deeper correction.
  • The retreat could help the buyers to catch a new leg higher.

The USD/JPY price dropped like a rock at the time of writing as the USD was weighed by the Dollar Index’s sell-off, while the Yen was lifted by the Japanese Yen futures’ rebound. However, the price started to drop after failing to stabilize above the 125.00 psychological level.

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The pair has faced only a false breakout above the key target, signaling that we may have a corrective phase after its strong leg is higher. So, technically, a temporary retreat was somehow expected. However, the price could retest strong downside obstacles before developing a new leg higher.

Fundamentally, the Japanese Yen was lifted by the Unemployment Rate indicator, which was reported at 2.7% below 2.8% expected and versus 2.8% in the previous reporting period. In addition, the US data came in mixed yesterday, but today, the HPI rose by 1.6% versus 1.2% expected, while the S&P/CS Composite-20 HPI was reported at 19.1% above 18.6% expected.

Later, the volatility could be huge as the US releases its JOLTS Job Openings which is expected at 11.00M below 11.26M in the previous reporting period. Also, the CB Consumer Confidence may drop from 110.5 to 106.9. Worse than expected US data or in line with expectations figures could weaken the greenback.

USD/JPY price technical analysis: Downside correction after the rally

usd/jpy price

The USD/JPY pair failed to stay above the minor up trendline and above the weekly R1 (123.32), signaling a potentially deeper correction. Now, it challenges the 23.6% (122.63) retracement level. A valid breakdown below this downside obstacle may activate a bearish phase.

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The next up trendline stands as a potential target. A huge correction could be activated only if the price makes a valid breakdown below this dynamic support. From the technical point of view, a downward movement was expected after its amazing rally. However, the current retreat could help the buyers go long again and catch a new leg higher.

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