The USD/JPY currency pair shed 5.4% over the course of last week, chalking up a near-full-bodied bearish candle and recording its largest one-week decline since 2008. Despite the monstrous sell-off, which ended at session lows, the long-term trend has been dominantly higher since 2021. In fact, year to date, the pair is 22% higher. As you can see from the weekly chart below, price tapped the lower side of Quasimodo resistance at ¥151.90 in October, which eventually led to last week’s fall.
So, overall, this may only just be another correction within the primary bull trend.
From the daily timeframe, support made a show at ¥139.55 and has appealed to buyers for now, a level aided by hidden bullish divergence from the relative strength index (RSI). Overhead, however, Quasimodo support-turned resistance at ¥141.60 serves as a potential headwind for the unit. South of the current support level is a decision point marked at ¥135.84-137.70, with a break unfastening the door to the 200-day simple moving average at around ¥132.84. Note that moving averages can offer dynamic support and resistance levels when tested (mean-reversion strategies, anyone?).
From the daily chart, should buyers continue to defend current support at ¥139.55 and dethrone resistance at ¥141.60, follow-through buying towards resistance at ¥144.95 might be in the offing. This would also be in line with the overall trend direction. Failure to hold ¥139.55, nonetheless, may see the decision point at ¥135.84-137.70 put in an appearance.
Shorter-term price action based on the H1 timeframe recently pencilled in a rebound from support at ¥138.86 that guided the pair north of the ¥140 psychological figure. This draws attention to a nearby supply zone at ¥142.46-142.25 which shares chart space with the daily timeframe’s Quasimodo support-turned resistance level at ¥141.60. Therefore, a whipsaw above the ¥141 level into H1 supply mentioned above could be seen, a move which might attract short-term bearish players into the market. However, do remember that the overall trend is directed to the upside, thus any bearish movement could be short-lived.
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