USD/JPY Forms Bullish Reversal Pattern at Key Support
Date: 02 July 2025
Overview
The USD/JPY currency pair is currently showing signs of a significant recovery after experiencing a period of strong bearish pressure. This rebound is particularly noteworthy due to its occurrence at a critical horizontal support level, which has previously withstood multiple selloffs.
Technical Analysis
The recovery is characterized by the formation of an inverse head and shoulders pattern, a classic reversal formation that typically indicates the end of a downtrend and the onset of a bullish phase.
Key Levels
Several important technical levels have been breached during this rebound:
- Red Neckline: The price has broken above the neckline of the inverse head and shoulders pattern, which activates a buy signal.
- Black Trendline: A descending trendline connecting lower highs since June 25th has also been cleared, confirming a break in the short-term bearish structure.
- Pink Horizontal Resistance: The price has surpassed a local horizontal resistance at 143.8, further supporting the bullish sentiment.
Market Sentiment
As long as the USD/JPY remains above the broken resistance levels (red neckline, black trendline, and pink horizontal barrier), the technical sentiment is firmly bullish. However, if the pair falls back below these key levels, particularly the yellow support zone, it could invalidate the current bullish setup and signal a potential false breakout, leading to renewed selling pressure.
Conclusion
The current technical setup for USD/JPY suggests a potential bullish reversal, provided that the price maintains its position above critical support and resistance levels. Traders should monitor these levels closely to gauge the strength of the recovery.