Short-term technical outlook on USD/JPY
Key technical elements
- The recent short-term uptrend from 08 September 2017 low of 107.29 has shown signs of bullish exhaustion. Firstly, it has rallied and came close to the upper limit of a medium-term descending range configuration in place since 10 March 2017 high. In addition, it has formed a bearish daily “Shooting Star” candlestick after post NFP on last Friday, 06 October (see daily).
- In the shorter time frame (1 hour), it has traced out a minor bearish “Double Top” configuration in place since 29 September 2016 low and staged a bearish breakdown in yesterday’s (10 Oct) U.S. session. In today (11 Oct) Asian session, it has staged a recovery from yesterday’s low of 111.96 but the rebound stalled right below the pull-back resistance of the aforementioned “Double Top” former neckline support at 112.70 (see hourly chart)
- In conjunction with the recent rebound from the 111.96 low, the hourly Stochastic oscillator has flashed a bearish divergence signal at its overbought region. These observations suggest that short-term downside momentum of price action has resurfaced.
- The next significant short-term support rest at 111.50 (minor swing low area of 26 September 2017, the lower boundary of the minor descending channel from 06 Oct 2017 high & the potential exit target of the “Double Top” bearish breakdown).
Key levels (1 to 3 days)
Intermediate resistance: 112.47
Pivot (key resistance): 112.70
Next resistance: 113.60
Therefore, as long as the 112.70 short-term pivotal resistance is not surpassed, the USD/JPY may see a further potential push down to target the near-term support at 111.50 in the first step within a medium-term range configuration.
On the other hand, a clearance above 112.70 shall invalidate the short-term bearish scenario to open up scope for a further potential up move towards the next resistance at 113.60 (upper limit of the medium-term range configuration from 10 Mar 2017 high).
Charts are from eSignal
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