Technical Analysis – USDJPY edges sideways; capped by 50-day SMA

Anthony Charalambous, XM Investment Research Desk

USDJPY’s recent obstruction to upside moves seems to be coming from the 107.69 level, that being the 38.2% Fibonacci retracement of the up leg from the 41-month low of 101.17 to the 111.71 high. The pair had drifted into a consolidation period (105.98 – 108.08) that has held for 6-weeks, where price advancements have been restricted by the 50-day simple moving average (SMA).

Aiding the struggle to climb higher is the converged 100- and 200-day SMAs, which further dictate a directionless market. Looking at the short-term oscillators we can observe conflicting signals in directional momentum. The RSI is barely improving from its 50 threshold while the MACD, above its red signal line, has just moved over the zero mark. Nevertheless, the negative tone in the falling stochastics and the turning down in the 50-day SMA endorse price weakness.

Should the pair retreat, initial support may occur at the 106.73 low and the 50.0% Fibo of 106.44 underneath. Next, if the bears conquer the base of the range at 105.98, further deterioration in price may meet the 61.8% Fibo of 105.20 – near the 105.13 important trough – before turning the attention to the 104.50 barrier.

To the upside, immediate resistance may surface from the 38.2% Fibo of 107.69 to the 108.08 ceiling of the sideways market, which also captures the 50-day SMA. If the step above manages to surpass the converged 100- and 200-day SMAs around 108.29, the pair may shoot for the 23.6% Fibo of 109.23 residing near the 109.37 peak.

Overall, USDJPY seems to be hypnotised in a neutral-to-bearish bias in the very-short-term timeframe. Yet, a move either above 108.29 or below 105.98 could ultimately set the forthcoming course.