USDJPY Bears Beware

Dec 29, 2023

As of the last trading day of 2023, the USDJPY pair appears poised for a potential reversal, with the weekly chart's RSI bouncing off the 30 line at 32.08. Given the anticipated volatility on this day, caution is advised. The pair seems to be starting an accumulation phase, marked by a successful purge of sell-side liquidity from the July swing low. On the daily chart, signs of this accumulation include peaked volume on December 14, indicating the final push from smart money, and a subsequent low on the 28th with lower volume, suggesting a lack of smart money involvement. Notably, bullish divergence on the RSI and smaller red bars on the MACD support the reversal thesis. Although USDJPY typically doesn't spend much time in accumulation, an automatic reaction may be imminent, potentially pushing prices out of the demand zone marked in blue. Traders should stay vigilant, considering risk management strategies and staying informed about external factors that could influence the currency pair.