USD/JPY Price Prediction: Bouncing from close to August 5 lows

USD/JPY is rebounding from key support near the August 5 lows.
It is forming a bullish candlestick although it is not possible to be certain until the current 4-hour period ends.
The trend remains bearish although a correction higher looks likely.

Joaquin Monfort FXStreet

USD/JPY has fallen close to the August 5 lows and bounced. It is forming a large, bullish Hammer Japanese candlestick pattern on the 4-hour chart – if the current period ends with the pattern intact it could signal the start of a substantial pull-back or correction higher.

USD/JPY 4-hour Chart

The Relative Strength Index (RSI) momentum indicator has exited oversold, giving a buy signal and indicating a greater chance of a counter-trend correction evolving. The RSI has also itself formed a double bottom pattern when looking at the previous time it was oversold on September 4. This is further evidence strengthening the case for a bullish reaction.

The short-term trend remains down, however, and it is too early to be sure that the pair is reversing the trend fully. The correction higher could soon run out of steam, leading the pair to recapitulate and start falling in line with the trend. It is a major tenet of technical analysis that “the trend is your friend” and the odds favor a continuation lower.

However, it would require a break below the August 5 lows at 141.69 to confirm a continuation lower. Such a move would probably then fall to support at 140.44 initially, the December 2023 lows.

Author

Joaquin Monfort

FXStreet

Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.

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