Market Overview for POLJPY on 2025-10-07

• POLJPY opened at 37.03 and closed at 35.80, down sharply after hitting a high of 38.11.
• A bearish engulfing pattern formed near 38.11, followed by a sharp selloff and multiple breakdowns below key support.
• RSI dipped into oversold territory (<30) late in the session, but volume remained low, signaling weak conviction. • Volatility expanded significantly during the selloff, with price breaching the 20-period Bollinger Band lower edge. • Fibonacci retracement levels at 37.40 and 37.00 provided temporary resistance on the way down, but failed to hold.

POL/Yen (POLJPY) opened at 37.03 on 2025-10-06 12:00 ET and closed at 35.80 by 12:00 ET on 2025-10-07. The pair reached a high of 38.11 and a low of 35.80 over the 24-hour period. Total volume was 149,401.6 units, and notional turnover amounted to approximately 5.6 million Yen, indicating active but mixed sentiment during the session.
The 15-minute chart reveals a classic topping pattern followed by a breakdown. A bearish engulfing candle at 18:30 ET marked a turning point, confirming a reversal from a bullish to a bearish bias. Price action then accelerated downward, breaching multiple support levels, including the 20-period moving average. By the end of the session, POLJPY closed below both the 20 and 50-period moving averages, with the 50-period line resting around 37.30. On a daily timeframe, the 50 and 200-period moving averages were both above current levels, reinforcing the bearish momentum.
Momentum indicators showed a clear bearish divergence. The RSI dropped sharply into oversold territory late in the session, below 30, but failed to trigger a rebound, suggesting exhaustion rather than a reversal. MACD turned negative early in the selloff and remained in bearish territory, with the signal line crossing below the MACD line at 01:00 ET. Bollinger Bands widened significantly during the decline, with the price closing below the lower band, indicating high volatility and bearish pressure. The 20-period Bollinger Band width expanded by over 50%, signaling a potential consolidation phase ahead.
Fibonacci retracement levels played a minor role in the selloff. The 61.8% retracement level of the intra-day high (38.11) sat at 37.00, and the 38.2% level at 37.40. While both levels briefly slowed the decline, they failed to hold against the broader bearish trend. Volume spiked during the breakdown below 37.00, particularly around 14:15 ET, as price dropped from 37.17 to 36.71. However, volume faded significantly after 18:00 ET, even as the selloff continued, indicating a lack of follow-through.

Backtest Hypothesis

Applying a backtest strategy that triggers a short position when RSI falls below 30 and MACD turns negative with a bearish crossover could offer a viable approach. This strategy would target the oversold condition seen late in the session while aligning with the bearish momentum confirmed by the MACD. However, a stop-loss should be placed above the 61.8% Fibonacci level (37.00) to manage risk, especially given the fading volume in the latter half of the session. A time-based exit, such as targeting a 3% move from entry, could lock in gains if the 35.80 level holds as a new support.