USD/JPY erases gains after hitting 2-month high; posts double top near 113.12.
USD/JPY has reversed to the downside after printing a new two-month high of 113.12 in Wednesday’s trading session, posting a double top formation. Despite the latest pullback though, the pair has not posted a fresh lower low, which makes one hesitant to trust further strong declines for now. However, a short-term bearish correction is possible.
Looking at momentum indicators, the RSI is slipping in the positive territory, suggesting that the market could keep moving slightly lower in the near term. The stochastic oscillator recorded a bearish crossover within its blue %K line and the red %D line, indicating more losses.
Should the pair manage to strengthen its negative momentum, the next support could come around the 111.75 region, which stands near the 20-day simple moving average (SMA). A break below this area would challenge the medium-term ascending trend line, near the 23.6% Fibonacci retracement level of the up-leg from 104.60 to 113.16, at 111.15. Moreover, a penetration to the downside of the ascending line would shift the bias to a more neutral to bearish one.
On the flip side, if the bulls take the upper hand again, price advances may stall initially near the latest highs near 113.16. A potential upside violation of the aforementioned level would drive the pair until the next resistance of 113.70, taken from the high on December 2017. Further gains could open the door for the 114.70 level, identified by the peak on November 2017.
Overall, USD/JPY has been developing within an uptrend since March 26, however, it created a double top formation near 113.12, indicating a possible bearish retracement in the near term.
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