USD/JPY was retracing higher on a bullish trend since the crash post BOJ pivot in the third week of December, but the upside momentum didn’t continue. Technically, this pair reached above the 38.2% Fibo retracement after the better ADP employment and initial claims figures at 132.81. The price also moved above the 50% retracement of the 2022 trading range on the timeframe chart below that at 132.70

On Thursday the midpoint of the daily chart was broken, as the price surged on US ADP and unemployment claims and during the uptrend, the 20 SMA (gray) was acting as support on the H1 chart below, which shows that the pace of the uptrend was strong enough. But the reversal was even stronger, after such a steep move in a few hours. The price seems oversold now on the H1 timeframe, but the larger timeframe charts such as the daily chart above have taken over.

USD/JPY H1 Chart – Moving Averages Have Been Broken

The price fell more than 250 pips lower

On the daily chart, USD/JPY was finding support at moving averages during the bullish trend until late October when the Bank of Japan and the Finance Ministry of Japan intervened in the markets, but all moving averages have been broken now and the 200 SMA (purple) was the last one to provide support.

The 20 SMA has turned into resistance on the daily timeframe, which now shows that the pace of the decline is also quite strong. Buyers pushed the price above the 20 SMA (gray) earlier this week as the retrace continued, but sellers returned and they pushed the price back down, forming an upside-down hammer candlestick, which is a strong bearish reversing.

Now the odds of the FED continuing to raise interest rates have diminished after the US ISM services fell into contraction in December as shown on Friday’s report. So, USD/JPY is resuming the downtrend and we will sell retraces higher on this pair.

USD/JPY Live Chart