A Bullish Correction on Yen and a Bearish One on the Dollar Drag USDJPY Lower

Friday brings us a long-awaited and anticipated correction on the Japanese yen and also the American dollar. The combination of those two incidents results in a double bearish factor for our hero today – USDJPY.

The reversal on the yen didn’t happen randomly. We had a little help from the fundamental side of the market. Two prominent Japanese officials, Matsuno and Kuroda, expressed their concerns about the recent moves on the yen, the higher than usual volatility, and eye-catching weakness. For the market, that was an invitation for a correction.

Technically, it looks really solid for sellers. Of course, the long-term sentiment is positive but it doesn’t mean that we can’t have a bearish correction every now and then. The potential target for the drop is on the 38,2% Fibonacci, which at the same time corresponds with the high from July. Chances of us getting are quite high.

In addition to the 38,2%, the price may also test the long-term up trendline (black), just in case sellers take time to extend this correction for the next two weeks. A breakout of the black up trendline would bring us a proper, long-term sell signal, but chances for that happening are now very limited.