FX.co ★ USD/JPY: fresh downside continuation pattern

The USD/JPY pair rebounded after its massive drop but the bounce-back could be only a temporary one. The price action developed a potential bearish continuation pattern. Still, we'll have to wait for confirmation before taking action. It was trading at 126.83 at the time of writing far below 127.58 yesterday's high.

Fundamentally, the USD took a hit from the US Prelim GDP yesterday. The economic indicator reported a 1.5% drop versus the 1.3% forecast. Today, the Core PCE Price Index is seen as a high-impact event and it's expected to register a 0.3% growth. In addition, the Revised UoM Consumer Sentiment, Personal Income, Personal Spending, Goods Trade Balance, and Prelim Wholesale Inventories indicators will be released as well.

USD/JPY Flag Formation!

USD/JPY retested the 127.51 and now it seems determined to drop deeper. It has developed an up-channel pattern that could represent a downside continuation formation. Breaking below the minor uptrend line, making a new lower low could activate more declines.

Technically, after validating its breakdown below the descending pitchfork's median line (ml), USD/JPY was expected to drop. DXY's sell-off forces the greenback to lose more ground against its rivals.

USD/JPY Outlook!

A valid breakdown below the uptrend line and through 126.55 could activate more declines towards the lower median line (lml). This scenario could help the sellers to catch a downside continuation.