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USD/JPY - Doji on 4-hour, catches a bid at 50% Fib retracement

  • USD/JPY 4-hour chart shows bearish exhaustion (doji candle).
  • Rebounds from 50 percent fib retracement support

The USD/JPY pair is staging a rebound from 111.03 (50% Fib retracement of the Sep. low to Nov. high), adding credence to the bearish exhaustion as indicated by the doji candle on the 4-hour chart.

Bullish doji reversal?

A bullish doji reversal would be confirmed on the 4-hour chart if the current candle closes above the previous candle's high of 111.32. However, it would indicate the corrective rally has gathered steam as on the daily chart the bears still appear in control.

Further, the yield curve flattening continues with the spread between the 10-year yield and the 2-year yield falling below 60 basis points for the first time since Oct. 2007. Unless there is evidence of yield curve steepening, any technical bullish reversal is likely to be short-lived.

Also, the rebound from the key Fib support should be taken with a pinch of salt, given the trading holiday in Tokyo.

USD/JPY Technical Levels

Jim Langlands from FX Charts details the technical picture as follows-

The momentum indicators are generally looking heavy, and a test of 111.00 – and lower – would not surprise although the hourlies are now at oversold extremes and it may be worth waiting to see if we can head back towards the important 111.70 level to sell into.

Preferred Strategy:  It looks as though the market is generally trapped in being short Jpy so there will be plenty of sellers into dollar rallies from those looking to cut positions. Selling rallies is preferred today.


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