Technical Analysis – USDJPY downside risks endure under SMAs and diagonal line

Anthony Charalambous, XM Investment Research Desk

USDJPY is following a downward trajectory despite efforts to recoup recent losses, mirrored in the stalled blue Kijun-sen line and the improvement in the MACD oscillator. The negative direction appears to persist backed by the gradual declining simple moving averages (SMAs) and the unbroken bearish tone of the Ichimoku lines, with a falling red Tenkan-sen line.

The MACD, in the negative region, has pushed above its red trigger line while the RSI slowly glides lower in bearish territory.

To the downside, sellers may realize some immediate friction from the red Tenkan-sen line ahead of the 105.20 level, that being the 61.8% Fibonacci retracement of the up leg from 101.17 to 111.71. If the pair deteriorates further, the 104.50 and 104.18 key supports may challenge the negative structure. Dominating sellers could then drive the pair towards the 76.4% Fibo of 103.66, also turning the focus to the 103.09 trough.

If buyers re-emerge, initial limitations may occur at 106.17, ahead of a critical resistance section from the 50.0% Fibo of 106.45 until the 106.63 resistance, which overlaps with the descending line. Surpassing this tough zone, the price may target the 50- and 100-day SMAs at 107.03 and 107.43 respectively, prior to meeting the 38.2% Fibo of 107.69. Should the pair extend over the cloud’s ceiling at 107.90, the 200-day SMA residing at the 108.16 high may bring the climb to a halt.

Summarizing, a negative structure below the cloud seems to be controlling the market in the short-term picture. An initial break above the restrictive line and the 106.63 mark or below 104.18 may denote the next clear course.