USD/JPY has corrected back after touching the top of a rising channel it has been in since the start of 2023.  

USD/JPY Daily Chart 

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USD/JPY posted a bearish Hanging Man Japanese candlestick pattern on Wednesday July 3 (blue-shaded rectangle). The Hanging Man develops when a candle forms at a peak with a small body near its high and a long wick below. It was followed by a bearish down day, providing bearish confirmation.

USD/JPY proceeded to sell-off down to support from the April 29 high at 160.32, forming a price gap at the end of the move down – a possible sign of exhaustion.

USD/JPY 4-hour Chart 

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The pair has since recovered on July 8 (today) and filled the gap in the process. It is currently trading up against resistance from the 50-period Simple Moving Average (SMA). 

Given the possible exhaustion gap that formed at the end of the sell-off, and the fact that it is in a strong medium and long-term uptrend, there is a risk the pair could continue recovering. Most corrections are composed of three waves and so far the rebound has only formed one complete wave. It is possible it could at the least recover even higher, to a target at 161.40, the July 5 high, as it completes.

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