Strong RSI USD/JPY Divergence Is A Signal For A Drop

The very strong and clear RSI divergence for this pair formed very much on time to signal that the move to the upside is over at this stage. Which, in turn, gave the opportunity to open short positions on time.

As you can see on the screenshot, the divergence is between four main highs, and the limits of these movements are at 112.769, 112.177, 112.001 and 111.758. Which in turn means that we can expect a new retracement almost back to the last low of the wedge at 111.592.

In case the pair continues below that level and forms a new low we should watch out for a deepening of the divergence that signals for a move to the upside, since that has not reached its limit yet, which is at 117.869.

There is also a scenario where the move to the upside will reach its limit, and the divergence signaling for a drop will deepen, so we need to be exceedingly careful.