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USD/JPY Candlestick Analysis: Pullback Brewing Ahead?

USD/JPY Candlestick Analysis: Pullback Brewing Ahead?

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • USD/JPY Strategy: Flat, Pullback Expected
  • Candle Pattern, Chart Setup Hint at Losses
  • Waiting to Buy Into Dominant Rising Trend

The US Dollar may be in the process of carving out an interim top against the Japanese Yen, with a down move to validate our suspicions of a pullback in the first quarter if it materializes. Prices have transitioned into consolidation after seven weeks of consecutive gains following the appearance of a bearish Dark Cloud Cover candlestick pattern. The setup received added reinforcement from negative RSI divergence.

Since topping, consolidative price action appears to have traced out a descending Triangle chart pattern, warning that a more sizable reversal lower is in the cards. We will look for confirmation of the move on a break below the Triangle floor at 117.43. That would initially expose the December low at 115.55, followed by the 38.2% Fibonacci retracement at 113.78. The dominant trend is pointing higher and as such, we will look to a pullback as an opportunity to enter long once the correction appears to have run its course.

Weekly Chart - Created Using FXCM Marketscope

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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