Early in the European session, USD/JPYwas trading below 8/8 Murray and below the 21 SMA located at 136.92

Yesterday, the dollar/yen pair fell from weekly highs around 137.70 due to disappointing US data. The USD/JPY pair reached the 7/8 Murray level around 135.79 and made a quick drop of 200 points, but then it bounced back.

This technical bounce could be difficult to continue. The yen is now facing the resistance of 21 SMA located at 136.92.

In the event that USD/JPY consolidates below this level, it could resume the bearish cycle and could reach 135.93 again. The pair could even fall towards the 200 EMA located at 134.99.

As we can see on the 4-hour chart, the Japanese yen is trading within an ascending channel formed since July 29. In the event that there is a pullback towards 8/8 Murray or the top of the uptrend channel around 137.90, it will be considered an opportunity to sell around these levels.

On August 22, the eagle indicator reached an extremely overbought zone. It is likely that in the next few hours, the pair will make a technical correction and could reach the psychological level of 135.00. It could even reach the bottom of the uptrend channel around 134.30.

The formation of the inverted pennant could be a clear sign of a continuation of the bearish movement. The price could reach the area of 135.90 and even drop to 134.90.

The market sentiment report shows that there are 73.93% of traders who are selling USD/JPY. So it is likely that there will be a fall towards the support zone of the 200 EMA. From this level, the pair could resume the bullish cycle.

Our trading plan for the next few hours is to sell USD/JPY below 136.92 with targets at 7/8 Murray (135.92) and 200 EMA (134.99). The eagle indicator supports our bearish strategy as it is showing overbought signals.