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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