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USD/JPY is trading at 106.90 after the failure to take out the near-term resistance levels, still, the drop could be only a temporary one if the Nikkei and the USDX will climb higher in the short term.
The US data could be decisive today for the USD, some goo figures could help the pair to recover after the current sell-off. USD/JPY has rebounded in the short term, but it is still premature to talk about a reversal as long as we don't have confirmation that the USD will dominate the market in the medium term.
USD/JPY has found strong resistance at the confluence area formed at the intersection between the Pivot Point (107.28) with the first warning line (WL1) of the former descending pitchfork. The false breakout above these levels has signaled a bearish momentum in the short term.
The major and critical support stands at the 50% retracement level and at the S1 (106.47) level, only a valid breakdown below this area will open the door for a further drop and for another lower low.
Personally, I'm still confident that we could have an important leg higher if the pair will stay above the 50% and S1 levels. A valid breakout above the warning line (WL1) will represent a first signal that we could have another leg higher, but only a valid breakout above the Pivot Point (107.28) will really confirm it.
USD/JPY is under pressure as long as it stays below the first warning line (WL1), we could have a long opportunity if the price jumps above the WL1 and above the PP (107.28) and if it makes another higher high, to close above 107.44 high.
MACD has shown a bullish divergence lately, but the reversal is still unconfirmed. The pin bar, false breakdown with great separation below the 50% level, and below the S1 (106.47) has suggested that the downside is finished and that the USD/JPY pair could develop an upside swing, but as I've just said, only a valid breakout above the WL1, PP, and another higher high will bring a long opportunity.
On the upside, the R1 (108.57) could be used as strong resistance and viable target on the H4 chart.
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