Chart Art: Major Correction Brewing on USD/JPY?

Are we finally seeing signs of a pullback in the USD/JPY rally?

The pair retreated after reaching a ceiling at the key psychological level of 162.00 and looks ready to drop to nearby Fibonacci retracement levels.

This is the correction area I am watching on the 4-hour chart.

USD/JPY currency pair on 4-hour chart Chart by TradingView

The yen pair has been on the rise for most of June, as slower expectations of a Fed rate cut and the absence of actual currency intervention by the Bank of Japan have supported the rally.

However, traders appear to be nervous as the USD/JPY pair tests another major psychological barrier, fearing that Japanese officials may finally intervene in the forex market to prevent their currency from falling.

In addition, there is tension before US Non-Farm Payrolls Report for June There are also other games coming in the game.

Can the jobs report restore the dollar’s strength this week or are we about to see further declines in this pair?

Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the Japanese Yen and the US Dollar yet, it’s time to take a look at the economic calendar and stay up to date with the daily fundamental news!

The Fibonacci tool shows that the next potential support area is at the 38.2% level around S1 (159.29) near the dynamic inflection point of the 100 simple moving average. This moving average is above the slower 200 simple moving average to confirm that the uptrend is more likely to resume than reverse.

However, a bigger decline could find more buyers at the 61.8% Fibonacci retracement level which is close to the uptrend line that has held since May. This is also in line with the dynamic support of the 200 SMA and the second support level (157.71), as well as the previous resistance area.

Look for USD/JPY to continue to rally to a high of R1 (161.83) if any of these Fibonacci levels are able to keep losses under control.

Do you think the upcoming NFP report or a potential discussion by BOJ officials could lead to a major pullback for this pair soon?

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