- USD/JPY’s 4-hour chart is calling a stronger oversold bounce.
- The pattern would fail if the risk-off tone worsens.
USD/JPY’s 4-hour chart shows the relative strength index has created higher lows, contradicting the lower highs on the price chart.
That bullish divergence represents temporary bearish exhaustion, meaning the stage is set for a corrective bounce to the former support-turned-resistance of 110.28, especially if the risk appetite improves somewhat.
As of writing, the futures on the S&P 500 are reporting a 0.96% drop on the day, courtesy of escalating US-China trade tensions.
The bullish divergence of the RSI would be invalidated below 110.47. That will likely happen if risk aversion worsens during the day ahead.
Trend: Oversold bounce likely