USDJPY bulls testing major resistance, bearish retracement may take place

There has been an extended bullish rally after the USDJPY bulls breached the major resistance level at 110.85. This level was extremely significant for the long-term investors since the 61.8% bearish Fibonacci retracement level coincide at that level. Most of the aggressive price action trader managed to execute long orders on the breakout of a 61.8% retracement level. Currently, the pair is testing major resistance level at 112.80 and formed a nice bearish pin bar in the daily chart.

USDJPY daily chart analysis

Figure: Bearish pin bar formed right at the resistance level

From the above figure, you can clearly see the bears are trying to take control of this market near the critical resistance level at 112.80. Most of the professional traders have closed their long trade with a decent profit and currently looking waiting in the sideline for a clear trade setup. If the pair falls from this level the ultimate bearish target for this pair would be the broken 61.8% retracement level. This level is going to provide excellent support to this pair and any bullish price action signal will be an excellent opportunity to execute long orders. However, a daily closing of the price below the 110.80 will bring back the long-term bears in the market. This will eventually lead this pair towards the next major support level at 108.55. If the bears clear this support level, we can assume initial top formation right at 112.80 level.

USDJPY weekly chart analysis

Figure: USDJPY surging towards the 61.8% retracement level

In the weekly chart, we have a new scenario. The bears seem to be still in control of this market since the long-term weekly bearish retracement level is yet to breach. Currently, the pair is slowly heading towards the critical resistance level at 113.24 and we need a weekly closing of the price above that level to confirm the establishment of bullish momentum in this market. A clear break of the weekly Fibonacci retracement level will ultimately lead this pair towards the next major resistance level at 114.70. This level might provide some strong selling pressure to this pair but the bulls might take out this resistance level if it managed to break 61.8% bearish retracement level.

Fundamentally the recent performance of the U.S dollar is a little bit stable and we might see another rate hike from the FED officials prior to the closing of this year. On the contrary, the low Yielding Japanese is Yen is trading lower against most of its major rivals and the leading investors are expecting more bearish momentum in the Japanese economy. However, the long-term traders are advised to stay tuned with BOJ rate statement since they might tighten their monetary policy during the end of this month. Considering the technical and fundamental parameters, the overall bias for this pair is completely mixed. The traders are advised to wait for the clear signal to trade this pair.