Although the pullback was extended when the pair reached support at 109.115 in mid-August and sellers accepted a wider arch, I am now unsure if the pattern will fully consolidate.
Although the original target was 108.50, USD/JPY has been supported at 109.50 for the past month. Only today's trading session saw the pair break below. It is interesting to note that almost all daily candlesticks in this chart have a long tail, which indicates that traders are reluctant to commit to a particular direction. For example, USD/JPY fell to 109.53 during the session, but closed at 109.74 on Tuesday. This means that sellers had to cover 21 more pips in order to maintain the bearish reversal today. We are now seeing so many tails, raising the question of whether the pullback can gather steam soon.
The US dollar has not been doing well in recent times, despite a weakening cpi reading. However, the Japanese Yen is gaining safe-haven demand due to rising covid-19 cases clouding growth prospects and recent news about financial distress at Evergrabde, one of China's largest developers, which poses a systemic risk to the Chinese economy.