Thursday, May 28, 2020
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Technical Analysis – USD/JPY tests key support

USD/JPY tests key support; stochastics oversold.

USD/JPY attempted to cross above the 50-day simple moving average (SMA) and reach the 109 level last week but efforts proved fruitless, with the price resuming negative momentum towards the key 61.8% Fibonacci retracement level of the up-leg from 104.64 to 112.39.

The downward-sloping RSI suggests weaker short-term trading. Yet, with the Stochastics flashing oversold conditions in the market, upside corrections cannot be ruled out.

Should the 61.8% Fibonacci of 107.58 fail to halt downside pressure, the bears could next rest near the 107 psychological level before a more challenging battle starts around 106.77, the 5 ½-month low marked in June. Falling under the 106 mark, the focus would turn to the 105.60 level, taken from the lows registered in the February-April 2018 period.

In the positive scenario, a rebound in the price would bring the 50% Fibonacci of 108.50 back into view. Traders, however, may wait for a decisive close above the 109 number to further lift buying orders, probably until the 110 level. Such a move would also make the breakout above the descending line more reliable.

Meanwhile, in the medium-term window, the lower highs and the lower lows from the 112.39 peak continue to hold the sentiment bearish, with the declining 50-day SMA reducing hopes for an outlook reversal.

In brief, the short- and the medium-term risk for the USD/JPY market is skewed to the downside. 


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This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Source: XM

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