USD/JPY Analysis: Hanging Man Candlestick Signals Potential Bearish Reversal

USD/JPY has encountered a significant technical signal as it reaches multi-year highs, with the formation of a bearish candlestick pattern known as a Hanging Man. This pattern, observed at the 151.000s level, suggests a potential shift towards a short-term reversal and subsequent pullback.

The appearance of the Hanging Man candlestick pattern at key chart highs indicates a potential downside correction in the near term. If Friday concludes with a bearish red candlestick, it would provide confirmation of Thursday’s Hanging Man formation, further strengthening the likelihood of a downward movement.

While Japanese candlestick patterns typically indicate short-term reversals, the significance of testing the 2023 high level alongside the formation of this bearish pattern increases the probability of a decline.

Moreover, the 151.000s level holds particular significance as it historically marks a zone where the Bank of Japan (BoJ) has intervened to strengthen the Japanese Yen. This historical context adds weight to the potential for imminent weakness in the USD/JPY pair.

In terms of potential price targets, a pullback could find support at the 50-day Simple Moving Average (SMA) around 149.009. Conversely, a clear break above 152.000 would suggest continued bullish momentum, signaling the BoJ’s reluctance or inability to intervene effectively. However, any such upward movement may face resistance, with a possible target at the next psychological level of 153.000.