USDJPY is back at an important technical decision point after a volatile end to last week.
Recall that during Friday’s trading, USDJPY moved sharply higher following what the market interpreted as a dovish Bank of Japan interest-rate hike. The rally extended to 158.05, just above the key swing area between 157.90 and 158.04.
Sellers leaned against that resistance zone and pushed the price modestly lower. Later in the session, reports that the Bank of Japan was checking rates in the market—often viewed as a form of verbal intervention—helped trigger a much sharper decline.
The selloff pushed USDJPY below the 61.8% retracement at 157.536, with the price eventually finding support near the 50% midpoint at 156.656. That midpoint measures the volatile trading range going back to September 2.
Buyers defend the 50% midpoint
The price briefly moved below the 50% retracement on two separate hourly bars Friday and again on one hourly bar during today’s Asia-Pacific session.
However, the breaks could not generate additional downside momentum. Each move below the midpoint stalled, and buyers began stepping back into the market.
Since then, USDJPY has been moving modestly higher on an hour-by-hour basis. The high for today reached 157.52, putting the pair back near the 61.8% retracement at 157.536. The current price is trading around 157.455.
That makes the 61.8% retracement the immediate technical battleground.
What would give buyers more control?
If USDJPY can break and remain above 157.536, it would strengthen the short-term bullish bias and open the door for another test of the swing area between 157.90 and 158.04.
That zone stopped Friday’s rally, making it an important barometer for both buyers and sellers. A sustained break above 158.04 would represent a more meaningful bullish development and could encourage additional upside momentum.
Until that happens, buyers still have work to do.
Can sellers lean against the 61.8% retracement?
Sellers may use the 157.536 retracement as a low-risk area to reestablish positions.
If the price cannot extend materially above that level, a rotation back toward the 50% midpoint at 156.656 would not be out of the question.
A move below 156.656—and especially a break that is supported by momentum—would shift more control back in favor of the sellers. The chart’s rising 100-hour moving average, currently near 156.247, would then become another downside target.
Key technical levels
- 158.41: 200 day MA
- 157.90–158.04: Key swing resistance area
- 157.536: 61.8% retracement and immediate resistance
-
157.45 CURRENT PRICE
- 156.656: 50% midpoint and important support
- 156.27: Rising 100-hour moving average
- 155.776: 38.2% retracement
- 155.04–155.21: Lower swing support area
Trading lesson: Let the market prove the break
Retracement levels are not automatic turning points. Instead, they identify areas where buyers and sellers are likely to battle for control.
In this case, the 50% midpoint provided support, while the 61.8% retracement is now providing resistance. Those two levels have created clearly defined technical guardrails.
For traders, the next clue should come from a break outside those guardrails. However, simply trading briefly above or below a level is not always enough. Traders should also look for momentum and the ability to stay beyond the level.
The buyers had success defending 156.656, but they must now prove they can push and hold above 157.536. If they cannot, the sellers may get another opportunity to rotate the price lower.
For now, the battle lines are clearly defined. Let the price action show which side takes control.
This article was written by Greg Michalowski at investinglive.com.