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In the European session, USD/JPY fell below the psychological level of 130.00 and reached a two-week low at 128.12. At the time of writing, the pair is trading at 128.19 and above 5/8 Murray located at 128.12, with a strong bearish bias.
Yesterday in our analysis we saw a strong oversold signal when the yen reached 130.80. We invite you to read our article and get some tips.
The Japanese yen fell after hitting 6/8 Murray at 131.34. From this level, USD/JPY embarked on a bearish sequence and the bias remains bearish. The price is likely to reach the level of 125.00 in the short term.
The prevailing risk aversion sentiment, reflected by prolonged selling in equity markets, boosted safe-haven demand for the Japanese yen. Another factor supporting the yen's strength is the pullback in US Treasury yields, which put downward pressure on the USD/JPY pair.
According to the 4-hour chart, we can see the formation of a rising wedge. This pattern was broken below the 21 SMA which means that the price could reach the 125.00 level in the short term and could even fall to 121.87
On the other hand, a sharp break below 5/8 Murray could accelerate the bearish move and the price could reach 200 EMA at 126.86.
We must watch the 5/8 Murray level as a key point. In case the USD/JPY pair consolidates above this level, a pullback towards 129.30 could follow. Should it trade below 5/8, the downside pressure is likely to accelerate and we can expect a drop to 126.86.
Our trading plan for the next few hours is to continue selling the Japanese Yen below 128.12 or in case of a pullback around 129.30. Our ultimate target in both cases is the area 126.86 (200 EMA).
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