USD/JPY - Hanging Man reversal on the cards?

Thursday's price action - sharp recovery from the low of 113.54 and marginally weak close at 114.08 - formed the 'hanging man' candlestick pattern on the USD/JPY daily chart.

The currency pair fell below 114.00 this Friday morning as the 10-year treasury yield fell by 2.7 basis points. The curve (spread between the US 10-yr yield and the 2-yr yield) flattened to 73.67 basis points; the lowest level since 2007.  A flatter yield curve is USD bearish and vice versa.

Looking at the treasury yields/yield curve, it appears the market is setting up for a bearish hanging man reversal, i.e. hanging man candlestick followed by bearish price action today would indicate the pair has found a short-term top above 114.00 levels, although the fate of the Dollar-Yen pair depends on the US non-farm payrolls and wage growth data due at 18:00 GMT today.

Adam Buttom from AshrafLaidi.com writes - "In Friday's US jobs report, wages will remain the top market-mover in the non-farm payrolls report, where revisions will be closely scrutinized."

An upbeat wage growth figure may boost demand for the USD and help avoid the bearish hanging man reversal on the USD/JPY chart.

USD/JPY Technical Outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes-

" Technically, the 4 hours chart presents a neutral-to-bullish stance, as the pair remains well above bullish 100 and 200 SMAs, while technical indicators continue hovering within positive territory, with no clear directional strength."

Support levels: 113.60 113.25 112.80

Resistance levels: 114.40 114.85 115.10