Technical Analysis – USDJPY exits range area and tumbles to 4½-month lows

Christina Parthenidou, XM Investment Research Desk

USDJPY crashed out of the 118.15-106.00 range area and towards a 4 ½-month low of 105.37 on Monday, raising speculation that the sell-off may continue.

The 38.2% Fibonacci retracement of the 112.1-101.17 downleg is currently supporting the market. But if it soon gives up, the price could decelerate to 105.00, while lower, the bears may pause around the 104.35 barrier, which is slightly below the 2019 trough.

Meanwhile, the RSI and the stochastics in the four-hour chart look to have bottomed out in the oversold region, hinting that downside pressures are likely fading out. If the price rebounds near its recent lows, the 106.00 level could act as resistance to keep the focus on the downside. If the bulls claim that point, the 50% Fibonacci of 106.69 could next come in defence, blocking any move towards the 200-period simple moving average (SMA) currently at 107.16.  Beyond that line, there is another barrier around 107.52 which the price needs to overcome to keep the rally going.

In brief, the bearish sentiment is likely to hold in the near-term, though risks for an upside correction are increasing as oversold signals are strengthening.