USD/JPY stands in bullish correction mode; the broader trend is bearish.
USD/JPY has advanced considerably after the significant rebound on the 16-month low of 104.60 at the end of the preceding month. Since yesterday’s session the price has been moving slightly higher above the 20- and 40-simple moving averages (SMA’s) in the daily timeframe. Looking at the bigger picture, the US dollar has been developing within a downward sloping channel against the Japanese yen since November 2016.
The positive bias in the near term is supported by the deterioration in the momentum indicators. The %K line of the stochastic oscillator is rising and is attempting a bullish crossover with the %D line. Moreover, the RSI indicator is sloping slightly up above the 50-neutral level, suggesting an upside correction could be possible.
If the market manages to pick up speed and remains above the simple moving averages the 23.6% Fibonacci retracement level near 107.80 of the down-leg from 118.60 to 104.60 could offer nearby resistance ahead of the 108.20 critical level. A successful close above the latter would open the way towards the 38.2% Fibonacci mark around the 110.00 psychological key level, raising chances for further increases.
However, should price decline again, immediate support could be found around the bullish cross of the 20- and 40-day SMA’s near 106.50. Then a leg below that level, the pair could meet the 105.65 level before the focus shifts to the 16-month low.
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