Japanese yen has been the best performing G10 currency during today's Asia-Pacific session. Gains came even as Japanese GDP report for Q3 2023 missed expectations and showed a 0.7% QoQ contraction in the July-September 2023 period. The pair was dropping over 1% at one point. However, those gains have been completely erased during the European morning trade and now the pair is trading a touch higher on the day. There were no news that could justify the reversal on the JPY market. However, the reversal supports a technical bullish scenario.
Taking a look at USDJPY chart at D1 interval, we can see that the pair slumped yesterday but has erased part of the drop, climbed back above the lower limit of the Overbalance structure and finished trading above the 200-session moving average (purple line). Another attempt to break below those two key technical levels was made today, and it has once again failed, with USDJPY recovering back above the aforementioned moving average. As a result, today's daily candlestick took a form of a bullish pinbar. A failure to break below the Overbalance structure signals that the uptrend on the pair is still in play. Also, a medium-term support zone in the 144.50 area looks to be a good place to launch a recovery move from a technical point of view, especially given a potential pinbar pattern painted in the area today. Should this be the case and USDJPY launched a recovery move, the first near-term resistance level to watch can be found in the 146.50 swing area.
However, traders should be cautious while trading JPY-tied currency pair. Currency is very volatile as markets seem to position for an imminent exit from BoJ's ultra loose monetary policy. Recent moves on JPY market show that expectations for BoJ pivot are very high. This means that the risks for JPY are actually tilted to the downside ahead of December's BoJ meeting (December 19, 2023) as failure to show a hawkish bias could trigger significant JPY weakening and a spike in USDJPY.
Source: xStation5
