Technical Analysis – USDJPY bulls look exhausted near short-term SMAs; narrow range holds

Melina Deltas, XM Investment Research Desk

USDJPY is holding around the 23.6% Fibonacci retracement level of the downleg from 112.40 to 106.77 near 108.10 and the expected bullish crossover within the 20- and 40-simple moving averages (SMAs) in the daily timeframe. Currently, the price has been developing within a narrow range of 107.05 – 109.00 over the last two months and the Bollinger Bands are squeezing, approaching the market price.

Looking at the momentum indicators, the RSI is marginally falling below the 50 level, while the stochastic oscillator has already entered the overbought zone and is returning slightly lower, suggesting a downside pullback in the market.

If prices continue to head lower, support should come from the lower Bollinger band, around 107.35, before meeting the 107.05 barrier. A drop below it would open the door for the five-month low of 106.77 ahead of the 105.65 area, shifting the bias back to bearish.

However, should an upside reversal take form in the congestion area, immediate resistance will likely come from the upper Bollinger band, which stands near the 38.2% Fibonacci mark and the 109.00 psychological mark. A successful jump above these crucial levels could open the way for an upside rally towards the 50.0% Fibo of 109.60.

To summarize, USDJPY is currently looking neutral in the short-term timeframe, while in the medium-term the picture is seen as bearish unless the price returns to the 61.8% Fibonacci of 110.25.