The US dollar versus the Japanese yen dropped after reaching the important 112.20 resistance area and printed a clear bearish engulfing that just might change the expected outcome.
Long-term perspective
The pair is in an ascending move starting at the 106.92 support area. Beginning with this appreciation phase, the first attempt to cross the 112.20 level was on March 5, 2019, when the price failed to confirm it as a support and retraced to 110.27. From there a second attempt took place with the actual piercing on April 24, 2019, which printed a bullish candle. But this was a short-lived event, as the price was not able to maintain its gains and went back under 112.20 on April 25, 2019 in the form of a strong bearish candle. These two candles, considered together as a pattern, form a bearish engulfing at an important resistance. In other words, the bears could not ask for more, as this is a very provocative opportunity for any seller and also a sign for any buyer that booking the profits might be a good choice.
If the pattern is not invalidated by an upwards move that will make a higher-high above the high of the bearish engulfing pattern, then a descend to 110.27 is natural to develop in the upcoming period.
Short-term perspective
The price is now out of the ascending channel that started after the confirmation of 109.74 as a support. Not only that it pierced the support trend-line of the channel, but it did it after falsely piercing the 112.15 resistance level, which gives credit to the bears.
The last frontier is now represented by 111.61 which is the only support that the bulls might use to try a new rally given the current context. If this level gives way, then the path to 110.88 and subsequent support levels is open.
Levels to keep an eye on:
D1: 110.27 112.20 113.75
H4: 111.61 111.90 112.15 110.88 110.23
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