The USDJPY price is forming a double top pattern at a key level. Could this offer a reversal on the currency pair?
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The price of the USDJPY has been in a significant upward trend for some time now but all trends must come to an end at some point. The recent fundamentals in the market have extended the USDJPY gains. The Federal Reserve hikes rates by 50bps with more hikes expected to come could keep the USD strong and the Bank of Japan have played a big part in continuing to devalue their currency.
The price of USDJPY could be about to reverse despite the recent bullish fundamentals for the USD. The US inflationary data forecasted this week shows a potential decline to inflation which is what the FOMC are looking for which could see some selling pressure come into the USD.
Looking at the daily chart we can see that the impulsive phases are getting shallower which shows us the buying momentum is beginning to fade. Not only this but the price has formed a bearish rejection of the previous swing high suggesting that a double top pattern could be forming. To add confluence to the reversal the RSI indicator is showing bearish divergence. This forms when the price makes higher highs but the RSI makes lower highs. This shows that the last high formed may not be as strong as it seems. The price action could offer short trading opportunities at these highs or if the price was to complete the pattern the neckline could offer opportunities as resistance.
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