Beginning of the month was very successful for the USD/JPY. Price managed to break the upper line of the channel down formation, which triggered the mid-term buy signal. As we later find out, this signal was false and instead of going up, the price declined and came back below the resistance again. If you follow Price Action rules, you do know that false breakouts (orange area) are very strong trading signals. That is what happened this time as well.
Currently the price is performing a very technical downswing. After we came down below the upper line of the channel down formation, we managed to create a mid-term flag formation (black lines). This structure increased the chances for a drop and after testing the upper blue line as a resistance, that is what happened. We are now witnessing a proper fall, supported fully by the technical signs. The closest support is the lower green area around the 110.0. That is the closest target for the current sentiment.
Our negative scenario for this pair will be denied once the price will come back above the upper blue line and the resistance on the psychological barrier of 112. Chances for that are now limited.
