The Japanese Yen has rallied as the Nikkei stock index plunged in the last days, USD/JPY has extended its sell-off and now is about to reach a critical confluence area, which could send the price higher again.
USD/JPY is trading at 110.53 and it maintains its bullish outlook despite the current bearish momentum. The current drop could be only a temporary one, USD/JPY could test and retest the near-term support levels before it climbs higher again. The downward correction was somehow expected after the impressive rally, the price needs to recapture bullish energy to be able to approach the 112.22 previous high.
USD/JPY is set to reach the median line (ML) of the major ascending pitchfork, you can notice that this line has represented very strong dynamic resistance in the past, so a rejection from this level could signal another leg higher. I've drawn a descending pitchfork to encapsulate the current drop, the price could reach the median line (ml) in the upcoming hours as well.
Actually, the confluence area formed at the intersection between the median lines (ML, ml) could act as a major support area. A false breakdown through this confluence area could signal another bullish momentum. USD/JPY has decreased after it reached the 50% Fibonacci line.
- Trading Tips
Personally, I'll wait to see how the price will react when it touches the confluence area. A false breakdown with a huge separation will give us a great chance to go long again on this pair with a first potential target at the upper median line (uml) or higher at the 112.22 level.
You should know that a valid breakdown through the mentioned confluence area it will accelerate the sell-off.
