The US dollar began to rebound against the Japanese yen after accumulating a 2.5% decline over five trading days. Within the daily timeframe, the subsequent movement of the currency pair after a pause allows us to identify further mid-term trends.
FxPro senior analyst Alex Kuptsikevich noted that the softening of the dollar accompanies the decline of the dollar against itself since the end of last month, but it can also be seen as a correction from the low point of 140.3 at the end of December to the high point of 150.8 last month. The buying positions for this currency pair are at the 61.8% level, reflecting the classic Fibonacci pattern.
The US dollar against the Japanese yen is also approaching the 200-day moving average, a level that has been a support since mid-2018.
Before the Bank of Japan makes its decision next Tuesday, the yen may consolidate over the week. This is also a sufficient interval for market forces to accumulate enough liquidity to take decisive action in one direction or the other.
If the US dollar against the yen falls below 146, potentially signaling the momentum of a bear market taking the lead, then we expect the next consolidation to occur no earlier than 140-141.
Conversely, if it can return above 148, where the 50-day moving average is, it would be an early signal for the currency pair to resume growth, with the first potential target at 150.8.
