Monday’s 250 pips spike amid vaccine news is slowly being erased, and the USDJPY pair is down 70 pips from Monday’s highs.
On Friday, it was trading 0.25% weaker at around 104.85, undermined by falling US yields.
The short-term time frame looks like a rounding top/double top pattern, which is a reversal formation. Moreover, sentiment is deteriorating as COVID-19 cases are exploding rapidly in the US, which will most likely lead to another round of national lockdown.
The support seems to be in the 104.85/80 area, and if bears push the greenback below this level, stop-losses of long positions might be hit, which could drag the USDJPY pair further lower. The first target should be at the previous critical support of 104.00.
If the pair drops below 104.00, the medium-term bearish trend could be renewed quickly.
Alternatively, if the pair starts rallying, the intraday resistance seems to be near 105.15 and afterward at around 105.60, where this week’s highs are located.
Should the USD jump above 105.60, the medium-term outlook might switch to bullish again.