The USDJPY has retraced some of the gains from yesterday's sharp move to the upside. Recall that in the US session, the price moved above a swing area between 129.63 and 129.787. That put the price between the aforementioned swing area and a higher one at 130.49 to 130.55 (the pair traded higher and lower in choppy trading between those swing areas from April 28 through May 12- with failed breaks above and below the area).
The high price today reached 130.235 in the early Asian session but has moved back to the downside. That move did take the price before the low swing area through 129.63, but the price has since moved back above the higher end of that swing area at 129.787. It looks like a failed break to the downside.
For USDJPY bulls, stay above the aforementioned swing area down to 129.633 and there should be more upside probing with the high for the day at 130.235, and the swing area between 130.49 to 130.55 as the next targets. Above that and traders would look toward 130.801 and the swing highs from April and May between 131.24 and 131.34. Those levels were 20 year highs.
When talking about 20 year highs traders to get nervous which may lead to reluctant buying. However, the Bank of Japan is intent on keeping the stimulus in play. Meanwhile the Federal Reserve is intent on slowing inflation by tightening rates toward neutral at 2.5% by the end of the year and perhaps even higher. Central bank divergence is often a catalyst for trending currency markets.
Taking a broader look at the daily chart below, the price decline from the 20 year highs reached in April and May stalled near a swing high from April 13 at 126.31 (the low price reached 126.34), and well above the swing high going back to March 28 at 125.076. The corrective move also was well short of the 38.2% retracement of the last trend move higher. That level comes in at 124.819. The inability to reach those targets kept the buyers more in control from the longer term prospective and have helped to the rebound higher.
