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  • The previous 15-minute candle of the USD/JPY closed at 113.85, confirming a downside break of the bear flag – a bearish continuation pattern – meaning the sell-off from the previous day’s high of 114.55 has resumed and the pair could drop to 113.00 (target as per the measured move method).
  • The bearish breakdown has happened after the news hit the wires that the Bank of Japan has kept the size of the ultra-long bond purchases unchanged from the previous operations, signaling growing tolerance for higher yields.
  • The sell-off, as called by the bear flag breakdown, could gather pace if the EM currencies continue to slide, worsening the risk aversion in the global equity markets.

15-minute chart

Spot Rate: 113.88

Daily High: 114.10

Daily Low: 113.84

Trend: Bearish

Resistance

R1: 114.06 (Oct. 1 high)

R2: 114.55 (previous day’s high)

R3: 114.74 (November 2017 high)

Support

S1: 113.53 (10-day exponential moving average)

S2: 113.00 (psychological support)

S3: 112.73 (38.2% Fib R of 109.77/114.55)