Over the past few weeks, the USD has lost nearly 800 pips against the JPY, driven by Japan's shift away from decades of negative interest rates. With the Bank of Japan raising rates for the second time in a row, investors are adjusting their positions to capitalize on these changes. However, no trend moves in a straight line indefinitely—corrections are a natural part of the market cycle, and we believe one is unfolding now.
USDJPY found strong support and buying interest at 151.00, leading to a 100-pip rebound. Given the pair's massively oversold conditions, we anticipate that this correction may continue higher as short-term buyers step in. The 153.80 level previously acted as support, meaning it could now serve as resistance. This level also aligns with the critical 38% Fibonacci retracement, making it a significant technical barrier.
We see this zone as an ideal entry point for short positions, allowing us to minimize potential drawdown while trading in the direction of the broader downtrend. Our target remains a potential Double Bottom forming around 151.00, where renewed buying interest may emerge once again.
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