USD/JPY surrounded by negative indicators in the short term.
USD/JPY is declining for the second day after a failing attempt on Tuesday to recover above the 61.8% Fibonacci of the down leg from 114.54 to 104.64 and the January uptrend line. Technically, the bearish sentiment could grow further in the short term as the MACD keeps strengthening in negative territory and below its red signal line. The RSI is distancing itself below its 50 neutral level, backing this view as well, while the negative slope in the 20-day moving average suggests that the downtrend started early this month is likely to hold.
Further weakness would open the door for the 50% Fibonacci of 109.59 where the sell-off paused last week. A drop below that barrier would doubt the sustainability of the January uptrend, with the price probably posting new red candles towards the 38.2% Fibonacci of 108.42. Should the latter prove easy to get through, the next target could be the January 4 low of 107.50 where any violation would also give control to the medium-term bears.
Alternatively, a reversal to the upside may initially retest the 61.8% Fibonacci of 110.76 and then the 20-day MA currently at 110.95 and near the uptrend line. Additional gains could find resistance from the 200-day MA which is flattening at 111.45, while higher clearance of the 112.30-112.75 congested zone could confirm another rally probably towards the 113.70 level. Yet only a decisive close above 114 would shift the medium-term outlook to a bullish one.
In brief, the short-term bias is turning more bearish, while in the medium-term USD/JPY is in a sideways move between 114 and 107.50.
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