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Talking Points:
- USD/JPY Technical Strategy: Flat
- Support: 124.10, 123.28, 122.73
- Resistance: 124.78, 125.20, 125.88
The US Dollar produced a bearish Evening Star candlestick pattern, suggesting a turn downward against Japanese Yen may be ahead. Near-term support is in the 124.17-10 area (resistance-turned-support, August 10 low), with a break below that on a daily closing basis exposing the 38.2% Fibonacci retracement at 123.28. Alternatively, a turn above the 14.6% Fib expansion at 124.78 clears the way for a challenge of the 23.6% threshold at 125.20.
Positioning is inconclusive at this point. On one hand, follow-through on the bearish candle setup has yet to see confirmed follow-through. On the other, the pattern’s presence warns against trying for the long side in line with the dominant long-term trade. We will stay flat for now until greater clarity emerges.
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com