Pause or pause?
USD/JPY dealt at its highest level in over 12-years earlier this week before reversing fairly sharply from just above 125.00 to leave an “outside day” on the daily chart. Not surprisingly this reversal coincided with an extreme reading in the Daily Sentiment Index or DSI which fell to just 5% yen bulls the day prior. Has the pair gone too far too fast? Or is this just a natural pause ahead of key data after taking out some very important resistance levels (2007 high, 78.6% retracement of 2002-2011 decline) over the past few weeks? Given the almost 6-month range that preceded this latest burst higher it is difficult to see this move petering out so quickly, but stranger things have happened. The highs from November/December 2002 around 125.50 look to be the next big upside pivot with a move above there needed to set up a push towards a Fibonacci attraction near 128.00. Weakness under 123.35 would warn a deeper correction is starting to take shape.
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