Relevance up to 21:00 2022-07-23 UTC–4
Early in the Asian session, the Japanese Yen (USD/JPY) is trading at around 138.50 and above the 21 SMA and approaching the 61.8% Fibonacci retracement.
USD/JPY is trading inside the uptrend channel formed on July 6th. On July 19, it tested the bottom of the uptrend channel and then made a strong technical bounce and is now trading at resistance levels approaching the 61.8% Fibonacci.
If the Japanese yen manages to consolidate above the 61.8% Fibonacci and reaches the zone +1/8 Murray at 139.06 in the next few hours, it could be a clear sign of a bullish advance and the price could reach the psychological level of 140.00.
As the 4H chart illustrates, USD/JPY has corrected to the 61.8% Fibonacci level which has a confluence with previous highs. This could be a decisive resistance for the pair. According to the 4-hour bearish scenario, in case the resistance levels are respected, we could expect a technical correction towards the 21 SMA at 138.16.
Additionally, the sharp break of the trend channel could mean a change in trend in the short term and we could expect a decline towards 7/8 Murray at around 135.93 and the price could even reach the 200 EMA at around 135.30.
Last week, several members of the FOMC said they would vote for an interest rate increase of 75 basis points at the next monetary policy meeting on July 26-27. This, in turn, would further weaken the Japanese Yen and it could reach the resistance zone at 140.00 and finally the +2/8 Murray at 140.62.
In the next few hours, the Central Bank of Japan will announce its monetary policy decision. It is expected that there will be no changes in the interest rate, but the Japanese Yen could strengthen because it is showing overbought signs.
Our trading plan for the next few hours is to sell below 138.80 or below the 61.8% Fibonacci at around 138.65. USD/JPY is expected to decline towards the support zone 138.15. In case the bearish pressure prevails, we could resume selling with targets at 137.50 and 135.93.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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