- The USD/JPY pair maintains a bearish bias as long as it stays under the median line (ml).
- False breakouts could announce a new sell-off.
- A valid breakout through the near-term resistance levels could signal a more significant rebound.
The USD/JPY price edges higher after reaching the multi-week lows at 132.50. Technically, a rebound is natural after its massive drop. The pair may come back higher to test the near-term resistance levels before coming back down.
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The currency pair plunged as the Dollar Index extended its corrective phase while the Japanese Yen boosted in the morning. The current rebound could help the sellers to go short again. Most likely, the rebound will be temporary.
Fundamentally, the Japanese economic data came in mixed today. Housing Starts dropped by 2.2% versus 1.6% expected, Consumer Confidence came in at 30.2 points below 31.4 expected, and Retail Sales rose by 1.5% less versus the 2.8% growth expected.
In comparison, the Unemployment Rate remained at 2.6% even though the trades expected a potential drop to 2.5%. In addition, Tokyo Core CPI rose by 2.3% exceeding the 2.2% growth estimated, while the Prelim Industrial Production surged by 8.9% more compared to the 4.3% estimated.
Later, the Core PCE Price Index may register a 0.5% growth; revised UoM Consumer Spending is expected at 51.1 points, while Chicago PMI could drop from 56.0 points to 55.1 points. Furthermore, Personal Spending and Personal Income indicators will be released as well.
USD/JPY price technical analysis: Downside bias
From the technical point of view, the USD/JPY pair maintains a bearish bias as long as it stays under the median line (ml), representing a dynamic resistance (support turned into resistance). The weekly S2 (133.52) is also seen as an upside obstacle. Testing these levels, registering only false breakouts could announce a new sell-off.
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A valid breakout above these obstacles could activate a more significant rebound. If the rate continues to drop, 131.25 is seen as a downside obstacle and target. The rate could extend its sell-off despite temporary rebounds if we don’t have a bullish reversal pattern.
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