- The USD/JPY pair is in a corrective phase, the next downside target is represented by the 61.8% retracement level.
- A larger correction could be activated by a valid breakdown below 61.8%.
- The downwards movement could be over if the rate comes back above the UML.
Our USD/JPY forecast notes the pair has dropped aggressively, ignoring all downside obstacles. In the short term, it seems unstoppable as the Dollar Index is bearish and the Japanese Yen Futures are strongly bullish.
Technically, the pair developed a strong correction after reaching major resistance. It remains to see what will really happen as the currency pair is almost to hit the 114.00 psychological level and the 61.8% retracement level, so the sell-off could be stopped.
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Unfortunately, for the US Dollar, the economic figures disappointed earlier today. The PPI rose only by 0.2% less compared to 0.4% estimates and versus 0.8% growth registered in the previous reporting period.
Furthermore, the Core PPI raised by 0.5% in December matching expectations, but less compared to 0.7% growth in November.
Fundamentally, the greenback took a hit also from the Unemployment Claims indicator which was reported at 230K in the last week far above 199K expected.
Tomorrow, the US is to release its retail sales data, Industrial Production, Capacity Utilization Rate, and the Prelim UoM Consumer Sentiment. On the other hand, the Japanese PPI will be published in the early morning.
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USD/JPY Forecast: Price Technical Analysis – Corrective Phase
As you can see on the H4 chart, the price found resistance at the first warning line (WL1) and now is traded at 114.10 level. It has registered a strong corrective phase, ignoring strong support levels.
After dropping below the descending pitchfork’s upper median line (UML), the USD/JPY pair could approach and reach the 61.8% retracement level where it could find support.
As long as it stays under the UML, the pari could extend its downside movement. Only coming back above the upper median line and stabilizing above it may signal that the correction ended.
A valid breakdown below the 61.8% (113.99), could open the door for larger drops towards the 78.6% (113.35) level. You have to be careful tomorrow as the US retail sales figures are seen as high-impact.
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