USDJPY Can Take a Small Break for a While

All eyes are most probably on the parity between the EURUSD at the moment. But there is another instrument, which is trading hot right now and, as you may have guessed, it’s USDJPY!

There’s a perception that the recent all-time highs are a result of the weak Yen. Of course, a weak Yen is an important piece of the puzzle but other pairs with the Yen do not look as bullish. At least, not anymore. So, the main suspect to blame is the USD.

While the EURUSD keeps pushing lower (0.9999 checked today!), the USDJPY stopped for a bit and we can now see a possible bearish reversal here. Of course, it’s still too early to claim an inevitable drop on the USDJPY but there is one pattern which increases the chances of that scenario – the head and shoulders pattern (gold). That pattern was activated today, when the price broke the neckline (red) and dropped almost immediately afterwards.

The first target was the support on the 136.7 (yellow) and we reached that quite fast. A bounce from this area could be a great occasion to buy and enter the market with a long-term trend. On the other hand, the price breaking that support could be a great occasion to sell. In that case, the potential target would be on the long-term up trendline (black). As for now, buyers seem to protect the yellow area on the hourly chart, which slightly favors the bullish side of the market.