The US dollar versus the Japanese yen currency pair seems to have recovered, but is the recovery sustainable?
The fall from the 109.85 high extended to the 106.12 intermediary support. From there, a bullish engulfing candlestick pattern formed, one that took the price above the 107.00 psychological level.
The interesting part is that this pattern came after the previous failure of the bulls to keep the price above this level, the failure consisting of the piercing that took place on July 18, and which later fueled the depreciation to 106.12.
However, the fact that the bulls were apt to bring the price back above 107.00 once more is a sign that they have faith in their strength. So, one possible scenario is to see the price consolidating above the 107.00 level. Also, as an extension of this scenario or as a separate one, the market could print a false break of 107.00, with the price, in the end, continuing to oscillate above the level. If one of these scenarios does materialize, then the bulls could eye the 108.05 intermediary level. If they are able to conquer it as well, then 109.08 will be their primary objective.
On the flip side, if the 107.00 level is validated as resistance, by a day closing under it and then departing from it or by a piercing accompanied by a throwback that confirms it as resistance, then the bears could revisit 106.12. Since this area seems to be well guarded by the bulls, the bears could have a hard time sending the price under this level. But, if in the end, 106.12 gives way, then 105.09 is the next bearish aim.
The depreciation from 109.85 stopped at 106.77, where the price began a consolidative phase. During this phase, the price falsely pierced the support, extending until the 106.02 level.
But the bulls counterattacked and sent the price back above 106.77 and even a little beyond 107.34, from where another retracement began.
If the bulls are able to guard 106.77, then they can hope for piercing 107.34 and confirming it as support. If this happens, then they can bring the price to the important 108.02 resistance.
But if 106.77 fails again, then 106.02 is the next stop.
Levels to keep an eye on:
D1: 107.00 108.05 109.08 106.12 105.09
H4: 106.77 107.34 108.02 106.02
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