In today’s technical setup, we’re watching USD/JPY, which is at a critical retest level following a break below the green uptrend line on Monday.
That bearish break was a notable signal, but buyers are not surrendering just yet. As Tuesday’s European session kicks off, the American dollar is regaining strength, while the Japanese yen is showing weakness, lifting the pair higher.
What’s happening now appears to be a classic price action scenario — a broken support being tested as resistance.
The yellow horizontal resistance is the level to watch here. This zone is now the gatekeeper between a confirmed breakout and a potential reversal.
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If the price fails at the yellow resistance, especially with patterns like a bearish engulfing, shooting star, or long upper wick, it would confirm the area as new resistance and trigger a short signal.
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On the other hand, if the price closes back above the yellow resistance, it would invalidate the breakout and confirm a false downside break, shifting sentiment back to bullish and activating a buy signal.
This is a textbook decision zone. The next few candles will define the directional bias for the days ahead.