Dear traders,

The last time I wrote about USDJPY, the pair went on to move more than 1,000 pips.

And guess what?

Today, I’m looking at USDJPY again.

This time, there is one level in particular that has my attention.

USDJPY Trading Analysis 02 September, 2026

The key level I’m watching is 159.500.

Price is currently trading just below a micro supply zone, which makes the reaction around this area particularly interesting.

My initial bias is bearish, but I don’t want to predict what the market will do.

I want to see how price reacts first.

Bearish Scenario

If USDJPY moves back towards 159.500 and rejects the level, I will start looking for a potential short opportunity.

Ideally, I would like to see that rejection confirmed on the 4-hour chart.

A strong bearish reaction or clear bearish price-action confirmation would strengthen the short scenario.

Until that happens, however, there is no trade.

Bullish Scenario

There is another possibility.

If USDJPY manages to close convincingly above 159.500, the bearish idea becomes much less attractive.

In that case, I would start looking for bullish confirmation on the 4-hour chart.

Some of the price-action patterns I would be interested in seeing include:

A convincing break and confirmation above the level could suggest that buyers have absorbed the supply and that the market is ready to continue higher.

My Current USDJPY Bias

For now, I am slightly more inclined towards the bearish scenario.

The bigger picture shows price sitting immediately underneath a micro supply zone, and 159.500 could prove to be an important decision point.

But a bias is not a trade.

This is something I think traders often forget.

We can build a hypothesis from the chart, but the market still needs to confirm it.

So rather than trying to predict whether USDJPY will reverse or break higher, I will wait for price to reach the area and show its hand.

159.500 is the line in the sand.

Rejection could open the door for shorts.

Acceptance above it could completely change the picture.

Now we wait.

Happy Trading,
Colibri Trader