【USD/JPY】1-Hour Chart Analysis｜May 6, 2025

USD/JPY Analysis – Battle Below 144 Yen, Clear Signs of Downtrend Formation

Overview (May 6, 2025)

The USD/JPY is currently trading around 143.80 yen, having clearly broken below the key level of 144.00 yen. This technical development strengthens the indication of a downtrend. Recent price movements show a dominance of selling on rallies, with the pair trading below both the 50-hour and 200-hour moving averages. Trend indicators like ADX and DMI support this view, suggesting further downside in the short to medium term.

Key Point 1: Moving Averages Indicate Continuation of Bearish Trend

Technically, a significant observation is that candlesticks are positioned below both the 50-hour (blue line) and 200-hour (red line) moving averages. This is a classic sign of a downtrend, with the 50MA acting as resistance on multiple occasions. The limited short-term rebounds indicate strong selling pressure among market participants. A break below the 143.80 yen support could lead to further declines towards psychological levels at 143.50 yen and even 143.00 yen.

Key Point 2: ADX and DMI Signal Trend Initiation

The ADX (yellow line) at the bottom of the chart is hovering around 0.15, indicating the early stages of a trend. Generally, an ADX above 0.20 signifies a clear trend, so attention is on its potential rise. Additionally, the DMI shows the -DI (red line) above the +DI (green line), confirming a bearish direction. This combination suggests the establishment of a bearish trend, supporting the validity of technical selling strategies.

Key Point 3: Volume Increase Correlates with Price Movement

Volume data accompanying recent candlesticks show increased trading activity near support lines. This suggests intensified selling at critical levels, indicating that the break below 144 yen might have been a genuine breakdown. A decline accompanied by high volume often reflects a consensus in the market, and a break below 143.50 yen could accelerate selling pressure.

※Image Source: cTrader Platform

Future Outlook and Trading Strategy

USD/JPY is at a crucial technical juncture, with the following levels likely to determine future movements:

• Can the 143.80 yen support line hold?: A clear break below this level could expose the pair to sharp declines towards 143.30–143.00 yen.
• Selling on rallies in the 144.30–144.50 yen zone: Even if a short-term rebound occurs, strong selling is expected around these levels, making sell-on-rally strategies effective.
• Will ADX rise above 0.20?: This is a pivotal point for trend indicators; surpassing it could signal a definitive entry into a downtrend.

Example Trading Scenarios

Bearish Scenario (Following Downtrend)
Entry: Short position after confirming a break below 143.80 yen
Take Profit Target: 143.30–143.00 yen
Stop Loss: Above the 144.50 yen resistance

Bullish Scenario (Aiming for Short-Term Rebound)
Entry: Long position after confirming a rebound signal around 143.80 yen
Take Profit Target: 144.30–144.50 yen
Stop Loss: If price breaks below 143.50 yen

Summary:

With a clear break below 144.00 yen, USD/JPY is exhibiting a strengthening short-term bearish bias. Considering the positions of moving averages, the structure of ADX and DMI, and volume trends, selling strategies remain favorable. Particularly, a decisive break below the 143.80 yen support line could present a good opportunity for short entries. It's essential to monitor external factors like economic indicators and U.S. interest rate trends, combining technical and fundamental analyses for strategic trading.

Disclaimer:

This article is intended for informational purposes only and does not constitute a recommendation to buy or sell any financial instrument. All investment decisions should be made at your own discretion.
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