Bearish Trendline Could Open Opportunities for Short Positions

Summary:

This divergence signals that buying strength is exhausted, potentially opening the door for a decisive move to the downside.

Sell USDJPY

End Time

CLOSED

155.780

ENTRY

154.800

TGT

156.400

-- -- --

362

Points

Profit

154.800

TGT

155.418

CLOSING

155.780

ENTRY

156.400

Bank of Japan (BoJ) Governor Kazuo Ueda reiterated on Monday that the Japanese central bank remains on track to raise interest rates, provided that prices and the broader economy continue to develop as anticipated. Ueda added that the probability of the BoJ's base-case scenario for growth and inflation is gradually increasing. This potential for tightening, however, is offset by domestic concerns. Rising Japanese Government Bond (JGB) yields are actively increasing the country's debt servicing costs, effectively limiting the BoJ’s capacity for aggressive tightening and posing a structural obstacle for the Yen (JPY).

U.S. economic data released on Monday painted a softer picture for the manufacturing sector. The ISM Manufacturing Purchasing Managers' Index (PMI) fell to 48.2 in November from 48.7, missing the forecast and marking the ninth consecutive month of contraction. The underlying details were equally concerning: the New Orders Index fell to 47.4, extending its losing streak, while the Employment Index dropped to 44, suggesting ongoing momentum loss in the labor market. The only area of resilience was the Prices Paid Index, which ticked up to 58.5, signaling persistent cost pressures.

Following the consistently weaker U.S. economic data, market participants have aggressively increased their bets on Fed interest rate cuts. Traders are now pricing in an 87% probability of a 0.25% rate cut at the Federal Reserve's meeting next week, a sharp acceleration from 63% just one month ago, according to the CME FedWatch Tool. Adding fuel to the dovish speculation is an unconfirmed report suggesting that former White House Economic Advisor, Kevin Hassett, has emerged as the favored candidate to be the next Fed Chair. Hassett is seen as an ally who supports U.S. President Donald Trump's call for a faster and deeper reduction in interest rates to stimulate the economy. U.S. Treasury yields remain firm, with the 10-year Treasury yield sitting at 4.086%, while real yields hold stable at 1.856%.

In geopolitical news, Russian President Vladimir Putin met with U.S. President Donald Trump's special envoy, Steve Witkoff, and son-in-law, Jared Kushner, in the Kremlin for talks on a possible resolution to the conflict in Europe. Just before the meeting, Putin issued a warning that Europe would face a swift defeat if it entered into a war with Russia, and he dismissed European counter-proposals on Ukraine as being "absolutely unacceptable" to Russia. Trump has repeatedly voiced his desire to end the conflict, but his efforts to date have yet to secure a peace deal. Bearish Trendline Could Open Opportunities for Short Positions_1

Bearish Trendline Could Open Opportunities for Short Positions_1

Technical Analysis

The USD/JPY pair is clearly positioned within a prevailing downtrend, evidenced by a defined bearish trendline and the failure to print new higher highs. This suggests that the downward trajectory could continue. The price has recently retested the confluence zone created by the bearish trendline and the 100-period Moving Average (MA), which sits at 155.91. The 200-period MA is positioned slightly higher at 156.27. This critical confluence zone offers a high-probability opportunity for entering short (sell) positions, with a target set near the recent local low of 154.80, the next key support level.

The Relative Strength Index (RSI) is currently at the neutral 47 level, having recently fallen from a high of 70 (overbought territory). Crucially, the clearest technical signal is a bearish divergence on the RSI compared to the previous touch of the trendline. This divergence signals that buying strength is exhausted, potentially opening the door for a decisive move to the downside. Conversely, a strong break and close above the bearish trendline would invalidate the current short setup and suggest that further gains are likely.

Trading Recommendations

Trading direction: Sell

Entry price: 155.75

Target price: 154.80

Stop loss: 156.40

Validity: Dec 12, 2025 15:00:00

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