Bottoming Under Confirmation

Eva Chen

Forex

Summary:

USD/JPY may initiate a new wave of upward rebound after confirming a bottom within the 153.80–154.30 zone.

SELL USDJPY

Close Time

CLOSED

154.597

Entry Price

153.280

155.000

158.137 -0.269 -0.17%

40.3

Pips

Loss

153.280

155.003

Exit Price

154.597

Entry Price

155.000

Fundamental Analysis

The market is currently on the eve of a global central bank "Super Week," with the striking divergence between US and Japanese monetary policies alongside upcoming macroeconomic data serving as the core drivers of currency movements.

US August core CPI month-on-month growth exceeded market expectations, pushing traders' implied probability of a September Fed rate hike to nearly 90%. It can be said that the hotter-than-expected inflation data has reshaped policy expectations for the Federal Reserve. The US August retail sales data—often dubbed "Retail Sales / Terror Data"—set to be released this Tuesday (September 15), will act as the final macroeconomic input before the Fed's September FOMC meeting.

Meanwhile, tightening expectations for the Bank of Japan (BOJ) continue to heat up. The market widely bets that the BOJ will hike interest rates by 25 basis points at its meeting this Thursday (September 18), with the probability standing as high as 75%. BOJ Policy Board Member Kazuyuki Masutani previously warned that if inflation accelerates, the central bank might be forced to hike rates rapidly, noting that underlying inflation is already very close to the 2% target. Expectations of policy normalization—combined with pressure from capital repatriation and the unwinding of carry trades—have prompted yen short speculators to re-evaluate their strategies, driving the yen to appreciate cumulatively by about 4% against the dollar recently.

Technical Analysis

On the daily chart, USD/JPY is currently in a pullback-and-stabilization phase above a long-term ascending trendline. Following a rapid pullback, the price has touched a confluence support area formed by the long-term ascending trendline and the 0.236 Fibonacci retracement level (around 153.80–154.20), displaying clear signs of halting its decline and rebounding. Key downside support lies at the 0.236 Fibonacci level (around 153.80) and the ascending trendline. A break below this support line would open the door for a new wave of decline toward the zone below the outer slow tunnel (EMA288/338, approximately 155.89–156.53) and down to the 0.382 Fibonacci retracement level (around 148.367). Key upside resistance is located in the 158.22–158.50 area, where the inner fast tunnel (EMA144/166) sits. While USD/JPY has tested the ascending trendline with high precision, whether it can successfully stabilize at this critical support and resume its long-term uptrend remains to be further observed.

In terms of technical indicators, within the dual-tunnel system, the inner fast tunnel formed by EMA144 (158.5084) and EMA166 (158.2215) is running above the outer slow tunnel formed by EMA288 (156.5356) and EMA338 (155.8994). Although both tunnels are compressed by short-term selling pressure, the overall bullish alignment structure remains intact, signaling that the foundation of USD/JPY's long-term bullish trend has not been broken. Although the current price (154.257) trades below both tunnels, given that the price is retesting the confluence of the long-term ascending trendline and the 0.236 Fibonacci support line, and that the current daily candlestick has formed a bullish candle with a long lower shadow, there is a strong demand for a mean-reversion technical rebound following an overextended move. USD/JPY may confirm a bottom in the 153.80–154.30 region before embarking on a new wave of upward rebound.

Given that USD/JPY has already experienced a rally after the open, intraday traders may look for short-term short opportunities at higher levels. Bottoming Under Confirmation_1

Trading Recommendations

Direction: Short

Entry: 154.597

Target: 153.280

Stop Loss: 155.000

Support Levels: 153.800, 148.367, 144.262

Resistance Levels: 155.899, 158.221, 160.681

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