Technical Analysis – USDJPY dives below 107; short-term bias turns bearish

Christina Parthenidou, XM Investment Research Desk

USDJPY came under severe selling pressure on Thursday, with the price quickly exiting the 109 area and sliding below the 107 level early on Friday. The momentum indicators are facing downside pressure as well, framing a bearish bias for the short-term trading. Yet with the RSI and the Stochastics moving closer to the oversold territory, any downfall could be limited.

The 78.6% Fibonacci of 105.60 of the upleg from 104.64 to 112.39 could provide nearby support to additional losses. Any violation at this point could open the way towards 105.60–an important barrier to bearish movements in early 2018.

In the positive scenario, where the price spikes above the 61.8% Fibonacci of 107.58, the 50% Fibonacci of 108.50 could take control ahead of the 109 round level. Further up, the bulls would aim for a rally above the Ichimoku cloud and the 109.58 level, though only a decisive close above 110 would switch the medium-term picture from bearish to neutral.

Summarizing, the short-term risk for USDJPY is currently viewed negative, while in the medium-term timeframe the market continues to hold a bearish profile as long as the price keeps trending under 110.