Earlier in the European session, the USD/JPY pair reached the psychological level of 135. According to the 4-hour chart, the pair is trading within an uptrend channel formed since April 4. The trend remains bullish but could be showing signs of exhaustion due to the fact that on April 17 the Eagle indicator reached extremely overbought levels.
The recovery in US Treasury yields and the US dollar's strength weakened the Japanese yen from the low of 129.63 reached on March 23. In the next few hours, we expect the Yen to make a technical correction and reach the 200 EMA located at 133.13. This level coincides with the bottom of the uptrend channel and could be a good point to take profits.
On the other hand, in case of a pullback to the top of the uptrend channel around 135.24, it will be seen as a signal to sell, with targets at the 21 SMA located at 134.30 and the 200 EMA located at 133.13.
The 7/8 Murray level represents a strong technical reversal. In case the USD/JPY pair accelerates its upward movement and reaches 135.93, we could expect a rejection in this zone, which will be seen as an opportunity to sell with targets at 132.81 (5/8 Murray).
A daily close and sharp break below 5/8 Murray could revive the bearish cycle and the instrument could fall towards the 4/8 Murray zone located at 131.25 and ultimately could reach the psychological level of 130.00.
Our trading plan for the next few hours is to sell the Japanese yen around current levels of 134.82, reckoning a rejection around the top of the uptrend channel located at 135.24 with targets at 134.30 (6/8 Murray) and 133.13 (200 EMA). The eagle indicator is showing a negative signal which supports our bearish strategy.
