The Asian session brought a significant weakening of the Japanese yen, driving USD/JPY sharply higher. The pair has been experiencing a strong recovery throughout the week, rebounding from a notable decline. However, the rally now faces a critical test at a major resistance level.
The green horizontal resistance, around 153.8, previously acted as a key support level at the end of January. Following the breakout below this level, it has now turned into resistance, making it a crucial point for sellers to defend. So far, the price remains below this resistance, providing an opportunity for a potential bounce and short-term selling pressure.
Adding to this resistance zone is the black downtrend line, which further reinforces the bearish outlook as long as the price remains beneath it. This confluence of resistances increases the likelihood of a short-term pullback or at least profit-taking action from traders capitalizing on this week’s gains.
However, a daily close above both the green resistance and the black downtrend line would completely shift the sentiment, triggering a strong long-term buy signal. If buyers manage to break through this resistance area, it would indicate a bullish breakout, opening the door for further upside.
For now, traders should monitor whether sellers hold the resistance or if buyers manage to push past these key levels to establish a new uptrend.