The USDJPY has experienced a prolonged downtrend since peaking at 161.941 on July 3, driven by technical factors that fueled bearish momentum. A notable failure swing reversal and a “Death Cross” between the 20-period and 50-period EMAs confirmed the shift in trend. However, after hitting a low of 139.568 on September 16, technical indicators have started signaling a potential upward correction, including a failure swing pattern and a break above key resistance levels. This suggests a possible shift toward bullish sentiment, with traders now eyeing key resistance and support levels to gauge future market direction.
High Impact Economic Events
Thursday 09:30 am (GMT+3) – Switzerland: CPI m/m (CHF)
Thursday 15:30 (GMT+3) – USA: Unemployment Claims (USD)
Thursday 17:00 (GMT+3) – USA: ISM Services PMI (USD)
Friday 15:30 (GMT+3) – USA: Nonfarm Employment Change (USD)
Chart Analysis
The USDJPY has experienced a sustained downtrend since reaching a peak of 161.941 on July 3, driven primarily by technical factors that amplified bearish momentum. A significant failure swing reversal occurred as the swing high of 161.798 failed to surpass the previous peak, followed by a break below the trough of 160.6254, confirming the shift in trend. Additionally, the formation of a double crossover between the 20-period and 50-period Exponential Moving Averages (EMA), known as a “Death Cross,” further reinforced selling pressure, signaling continued weakness in the pair.
Following the September 16 low of 139.568, technical indicators have begun to signal the potential for an upward correction. The price has moved above the 20- and 50-period EMAs, the Momentum oscillator has crossed the 100-line, and the Relative Strength Index (RSI) has risen above 50, reinforcing bullish momentum. Additionally, a failure swing pattern suggests a reversal is underway; the trough at 141.632 held above the previous low, and the subsequent break above 146.482 confirms the emerging uptrend. These developments point to strengthening bullish sentiment in the market.
Key Resistance Levels
Should the buyers maintain market control, traders may direct their attention toward the four potential resistance levels below:
146.482: The initial resistance is set at 146.482, corresponding to the swing high marked September 27.
149.625: The second price target is established at 149.625, aligning with the 161.8% Fibonacci Extension drawn from the swing high of 146.482 to the swing low of 141.632.
154.566: The third price objective is projected at 154.566, corresponding to the 261.8% Fibonacci Extension drawn from the swing high of 146.482 to the swing low of 141.632.
161.941: An additional price target is seen at 161.941, representing a peak from July 3.
Key Support Levels
Should the sellers take market control, traders may consider the four potential support levels listed below:
141.632: The initial support level is identified at 141.632, corresponding to the swing low marked on September 30.
139.568: The second support level is seen at 139.568, representing a daily low from September 16.
137.320: The third support level is positioned at 137.320, reflecting the 261.8% Fibonacci Extension drawn from the swing low of 143.425 to the swing high of 147.168.
136.186: An additional downside target is noted at 136.186, corresponding to the weekly support (S3) estimated using the standard Pivot Points methodology.
Fundamentals
US hiring rebounded in September, with private payrolls increasing by 143,000, surpassing the forecast of 125,000, according to ADP. This marks a break from five months of slowing job growth. Despite the pickup, the three-month average fell to 119,000, one of the lowest since 2020, reflecting a generally cooling labor market. Wage growth also slowed, with pay increases for job switchers rising 6.6%, the slowest since April 2021. Hiring was broad across industries, led by leisure, hospitality, and construction, while the information sector was the only one to cut jobs.
Conclusion
In conclusion, while the USDJPY has been in a prolonged downtrend since early July, recent technical signals suggest a potential upward correction. Traders should closely monitor key resistance and support levels and upcoming economic events to gauge the strength of this emerging bullish momentum.