USD/JPY Technical Analysis: Yen Recovery Signaled Ahead

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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 123.66, 122.80, 121.42
• Resistance: 124.78, 126.31, 127.25

The US Dollar produced a Bearish Engulfing candlestick pattern, hinting a top may be set below the 125.00 figure against the Japanese Yen. Near-term support is at 123.66, the 14.6% Fibonacci retracement, with a break below that on a daily closing basis exposing the 23.6% level at 122.80. Alternatively, a turn above the 100% Fibexpansion at 124.78 clears the way for a test of the 123.6% threshold at 126.31.

Risk/reward considerations argue against entering short with prices in close proximity to support. On the other hand, the absence of a defined bullish reversal signal suggests taking up the long side is premature. We will remain flat for now, waiting for an actionable opportunity to present itself.

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Daily Chart - Created Using FXCM Marketscope

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