The US dollar has retreated against its major trading pairs over the past two weeks, but notably, the USD/JPY has seen one of the most interesting pullbacks. After peaking on Jul. 14, the USD/JPY has fallen more than 4% from a peak just below 139.500.
The 2-week weakening streak may continue as the sentiment from the previous FOMC meeting has been conceived as mildly negative for the USD. The Federal Reserve increased its interest rates by 75-basis-points for the second consecutive time on Wednesday, but Chair Jerome Powell stated that a slower hike pace is possible, suggesting that the hawkishness may have already passed its peak. This sentiment induced a sharp correction to the downside in the pair.
The perspective on this pair on the daily timeframe suggests that the USD/JPY may continue its downward trajectory as the price closed below the 50-day moving average, closing in on 133.300 after creating a low at 132.504.
Together with the Donchian Channel Fibonacci Zone, we can see that the price fails to stay inside the blue zone after hitting 138.879 high, breaking below the grey zone and creating a three-day consolidation range between 137.422 and 136.086 before falling inside the orange zone, indicating a possible downtrend.
With this indicator, the price inside the blue zone is considered an uptrend zone, the grey zone is considered a ranging zone, and the orange zone is considered a downtrend zone. These Fibonacci lines/zones can also act as either support or resistance levels and can be used by traders as entry and exit points.