USD/JPY Technical Analysis: Bearish Reversal in Progress?

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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 124.12, 123.41, 122.84
• Resistance: 124.56, 125.27, 125.85

The US Dollar put in the largest decline in a month against Japanese Yen, with negative RSI divergence hinting a larger downturn may be ahead. Near-term support is at 124.12, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis exposing the 38.2% level at 123.41. Alternatively, a turn above the 14.6% Fib at 124.56 clears the way for a test of the August 12 high at 125.27.

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