USD/JPY Rises on Dovish BOJ, Awaiting Confirmation of Initial Reversal Signal

USD/JPY surged higher on Wednesday as traders took profits from the steep fall of the past few days, driven by risk aversion that had boosted demand for the safe-haven yen.

The Japanese currency had made an impressive rally of 8.5% against the US dollar in July and early August, supported by recent interventions and a BOJ rate hike, while a strong migration into safety had lifted the yen to an eight-month high.

However, today’s comments from a BOJ official indicated an unexpected shift in policy outlook, souring sentiment and adding pressure on the yen.

The fresh acceleration followed Tuesday’s Doji candle with a long upper shadow, which had signaled indecision. This added to recovery signals as the price broke above the initial resistance at 146.43 (the 23.6% Fibonacci retracement of the 161.80 to 141.68 fall). A close above this level would reinforce the near-term structure, aiming for targets at 149.36 and 150.00 (38.2% Fibonacci / psychological).

Adding to the positive near-term signals was a false penetration into the weekly cloud, accompanied by a long-tailed weekly Doji and the formation of a bear trap.

However, daily studies remain predominantly bearish (moving averages above the price and momentum deeply in negative territory), necessitating caution.

A lift above the daily Tenkan-sen (148.45) will be needed to ease existing downside risks, while a break of the 149.36/150.00 pivots will signal a reversal.

Res: 147.90; 148.45; 149.36; 150.00
Sup: 146.43; 143.62; 141.68; 140.00