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  • The USD/JPY rebounded as the DXY rallied after positive US data.
  • The pair could develop a larger upwards movement only after taking out the warning line (wl1).
  • A new lower low could activate a broader leg down.

The USD/JPY price rebounded from 109.11 yesterday’s low and now is traded at 109.78 level. The pair has rallied as the Dollar Index has registered a strong bullish momentum, while the JP225 (Nikkei) stays higher. Unfortunately, we don’t have a clear direction in USD/JPY at this moment.

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The pair is still trapped within a key ranging pattern, so only a valid breakout from this formation could bring fresh trading opportunities. The Japanese Yen was punished by the Japanese Trade Balance, reported lower at -0.27T versus 0.10T expected. As you already know, the USD/JPY was boosted by better-than-expected US retail sales data.

Retail Sales registered a 0.7% growth versus 0.7% drop forecasted and after a 1.8% drop registered in July, while the Core Retail Sales rose by 1.8% compared to 0.1% decline expected and versus the 1.0% drop registered in July. Tomorrow, the US Prelim UoM Consumer Sentiment could help the USD to resume its appreciation.

USD/JPY price technical analysis: Key ranging behavior

USD/JPY 4-hour price chart
USD/JPY 4-hour price chart

The USD/JPY pair found strong demand on the weekly S2 (109.11) and now is traded at 109.66 below 109.82 today’s high. However, it’s still trapped between 109.06 and 110.69 levels. Only a valid breakout from this pattern could bring new short or long opportunities.

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The pair dropped after escaping from the triangle pattern. The USD/JPY pair has registered an aggressive breakdown through 109.58 static support, but it has failed to reach the 109.06 downside obstacle. Technically, the price has escaped from a descending pitchfork, signaling potential growth. The first warning line (wl1) is seen as a dynamic resistance. Making a valid breakout through it could announce a potential further growth.

As long as the price stays below it, the USD/JPY pair will likely remain under massive selling pressure. A new lower low could really activate a larger downside movement. On the other hand, the Dollar Index is bullish, so further growth could help the USD resume its appreciation.

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