On the daily chart below, we can see that the big falling channel that contained the USD/JPY price action has been broken last Friday when the NFP report came out much stronger than expected, which coupled with the big beat in ISM Services PMI reignited fears of inflation persisting higher and the Fed being forced to hike above its projected terminal rate.
In fact, US Treasury yields spiked up as the market started to reprice future interest rates expectations and it took the USD/JPY price with it because they are correlated.
We can also see the long divergence that’s been going on since December 2022 and the break of the channel may now signal a bigger pullback to 142.177.
On the 4 hour chart below, we can see more clearly the breakout of the channel. The price now is pulling back probably awaiting the US CPI report next week before the next big move.
There’s a strong support at 130.50 where we have a previous swing point and the 50% Fibonacci retracement level.
The 61.8% level will be the last support before the sellers most likely regain control and start to target lower lows.
On the 1 hour chart below, we can see the support at 130.50 holding for now. It may even turn into a triple bottom on that level.
The buyers would have more conviction once the blue short-term moving average rises above the red long-term moving average signalling a change in momentum to the upside.
A further push lower towards the 61.8% Fibonacci level and the 130.00 psychological round number may print a divergence giving the buyers a last chance of defence.
The target for an upside move should be the 127.20% Fibonacci extension level where there’s also a swing resistance as confluence.
