Technical Analysis – USDJPY stages recovery, but remains in downtrend
USDJPY staged a fierce recovery over the last few sessions. The pair found fresh buy orders near 129.65 and has risen to challenge the 131.70 region, where a battle is currently taking place between bulls and bears. Despite this rebound though, the market has not escaped its downtrend.
The price structure on the four-hour chart still consists of lower highs and lower lows. Similarly, the 50-period moving average (MA) has crossed below the 200-period one, forming a so-called ‘death cross’. Both suggest the overall picture remains negative.
Momentum studies reflect the latest spike in the price, as the RSI has crossed above 50 while the MACD is above its red trigger line. However, neither oscillator reveals much about the next directional wave.
For buyers to remain in control, they would need to pierce above the 131.70 zone, which also encapsulates the 50-period moving average. In this case, the next area to provide resistance might be around the 133.00 handle, which was the latest local high.
Now in case sellers come back into action, the 130.50 territory could be their first target. Slicing below this area, the focus would turn to the recent low of 129.65, where the lower Bollinger band is also located. Any further declines would signal the resumption of the prevailing downtrend, opening the door towards 129.00.
In short, the latest recovery in USDJPY is not enough to alter the broader negative outlook. For that to change, buyers would need a new high above 133.00.
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