USD/JPY forecast: Fair value gap caps recovery, bears eye breakdown

Where price stands

On the daily chart, USD/JPY has been correcting lower from recent highs near the 158 area. Price action shows a series of lower highs and lower lows — a classic pullback within a broader downtrend. The most recent candles show buyers trying to push — but struggling to break back above prior support turned resistance.

On the H4 timeframe, the key focus is the Fair Value Gap (FVG) marked in blue, sandwiched inside a broader zone (red) that represents distribution. Price has climbed back into that gap area — often a pivot zone where liquidity hunts occur — and is now testing it for either rejection (bearish continuation) or breakout (bullish pullback).

The market’s behavior around this zone will likely dictate the next directional leg:

• If price convincingly rejects the FVG and heads lower: sellers regain control, continuing the downtrend.
• If buyers reclaim above the FVG and break 155.19: a deeper retracement could unfold toward 156+ levels.

With daily structure still bearish and no clear impulsive reversal yet, the preferred bias remains downside continuation until proven otherwise.

What the price action tells us

Daily structure

• Lower highs and lower lows remain intact.
• No confirmed bullish reversal pattern (no higher low + higher high sequence yet).
• Recent daily wick rejection at upper levels shows selling pressure.

Four-hour fair value gap context

• FVGs are often mean reversion magnets and liquidity zones.
• The price has filled back into the gap — a normal retracement within a corrective move.
• How price reacts inside and just above the gap will reveal directional intent.

Technical outlook

Bearish bias (Primary)

Scenario:

• Price fails to break above ~155.19.
• FVG acts as resistance.
• H4 forms bearish candlestick rejection (long upper wicks, bearish engulfing).
• Sellers push price lower through recent swing lows.

What to look for:

• H4 rejection pattern near upper range of zone.
• Continuation to structure lows near 154.20 → 153.80.
• Momentum pickup on break of minor lows.

Targets on bearish continuation:

• Initial: 154.20 – 153.80
• Extended: 153.50 → 152.80
• Psychological support: 152.00

Bullish pullback (Alternative)

Scenario:

• Price breaks above the 155.19 resistance level.
• FVG turns supportive, not resistance.
• Buyers take control back into broader range resistance (155.90+).

Key Triggers:

• Clean H4 breakout above recent highs.
• Subsequent pullback holds above ~155.19 for support.
• H4 higher highs and higher lows begin to form.

Targets on pullback:

• Near-term: 156.00
• Secondary: 156.60 – 157.00
• Bullish invalidation of bearish trend if price breaks prior swing high above 157.20 on daily.