Technical outlook:
USDJPY continues to baffle traders with yet another high around 126.30 mark on Wednesday. The currency pair has taken out a major multi-year resistance at 125.85 (June 2015), hence probability remains high for a meaningful pullback from here. Immediate support is now seen at 125.75 and a break below that will be the first step to a larger reversal.
USDJPY has been hitting fresh swing highs lately along with strong bearish divergence on RSI as presented on the 4H chart here. Also note that the divergence is seen across multiple timeframes making it a strong potential reversal zone. Watch out for a slip below 125.75 to confirm that bears are back in control.
Furthermore, the next major support is seen at 121.30 mark. A break below that will send a stong bearish trend reversal confirmation ahead. Downside risk remains large from current levels as traders prepare to initiate fresh short positions below 125.75 mark. Prices slip below 125.90 levels at the time of writing and would be interesting to see if 125.75 could break.
Trading plan:
Preparing for a potential drop from 126.30.
Good luck!
