Possible “hammer” on the USD/JPY

The USD/JPY tried to break below the 109.00 level, but closes above that level, forming what it appears to be a hammer formation. The hammer is a bullish reversal candlestick pattern that may be confirmed if the next daily candle closes to the upside, indicating a possible trend reversal on the USD/JPY. In order for the trend reversal to confirm, the pair must break above the trendline that we see over the chart. In case of a bullish pullback, the zone where the 55 day EMA and the 200 day EMA are coinciding, which is the 111.32 level, may act as resistance. The MACD indicator will have to also show a trend reversal in order for the pair to go higher. On the other hand, if the 55 day EMA (purple line) crosses below the 200 day EMA (blue line), then a “death cross” pattern may develop and the pair may continue falling in the midterm. What this means is that the USD/JPY still has a chance of continuing below the 109.00 level with its bearish trend.