USD/JPY smashes crucial support

The Thanksgiving Day brings us bigger correction on the American Dollar. Although it has been some time since it started, the correction definitely accelerated this week, especially after yesterday's FOMC Meeting Minutes. Minutes were dovish as officials expressed their willingness not to use big hikes in the near future. They also noted a possible negative impact of higher rates on the economy.

The weakness of the USD is widespread but on the USDJPY, it gives us especially promising technical setup. First of all, on November 10, USDJPY broke the mid-term up trendline (blue). Later on, the price dropped towards the 139 support (green), which was defended and initiated a bullish correction. The correction was very technical as it went precisely to the broken up trendline, testing it as a resistance. The test was positive for sellers and resulted in their decisive victory. After the contact with the up trendline, the price pretty much collapsed, now being over 400 pips lower.

In the European session, USDJPY is breaking below the 139 support and if sellers manage to close a day below this level, we will get a legitimate, mid-term sell signal. In that case, the target would be almost 700 pips lower on the 131 support (orange). Chances of such move are quite significant.