Technical Analysis – USDJPY faces bearish risks inside descending channel

Melina Deltas, XM Investment Research Desk

USDJPY pulled back from the 40-period simple moving average (SMA) and the upper bound of the descending channel in the previous couple of sessions. The short-term risk seems to be to the downside as the price is ready to cross below the Ichimoku lines and the RSI is pointing south in the negative territory. However, the MACD is gaining some ground above its trigger line, although it is still developing in the bearish area.

Further losses could lead the market towards the 104.92-105.02 support area before the  lower surface of the channel around 104.70comes on the radar. Penetrating this region, the 104.40 barrier could be the next target, taken from the low on September 22, and if the bears move the pair even lower, the 104.00 round number could be a crucial level to watch.

In the short-term timeframe the picture is negative and only a significant rally above 105.64 could change it to neutral. An advance above 106.50 may shift the bias to bullish in the medium-term window.

In brief, the market continues to back a bearish outlook in the short term confirmed by the falling channel and the technical indicators.