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Short-term bearish shadows for USD/JPY

April 10, 2014 in Chart Alert

We had mentioned on March 15th that we would expect some volatile side ways moves between 100.00 and 105.00 for USD/JPY. The pair is moving that way. The recent strong fall from 104.13 suggested that the resistance of the psychological level of 105.00 is staying intact even when the pair had tried to break over it.

100 and 105 fight is on one side but the which side has more pull? Well, overall we stand by what we have been mentioning that a decisive break over 105.00 and a test towards 108.00/110.00 are on the way, sooner or later. However, the recent price-action has indicated that the downside pull is gaining strength. We do not take that as bearish outlook but just as a correction.

Let’s see what the charts say.

The pair broke the support of 200-day moving average

Break of 200 day moving average

The pair broke the support of the short-time trend line

break of trend line support

The weekly MACD stays bearish

Weekly MACD bearish

The daily MACD gave a bearish crossover signal

Daily MACD bearish crossover for USDJPY

What now?

Well, all of the above observations are indicating a bearish outlook. And yes, a further drop is expected. The question is whether this drop will find a support in the range of 100.75 to 101.20 or not.

Longer time trend line support for USDJPY

The possibilities of a break of that support are high now. However, the current outlook will not turn really bearish till a  decisive break below 100.60 takes place. 100.70/100.75 represents the near-term trend line support and though a sharp fall like this may cause a brief break of this support but any decisive break below 100.60 may extend the fall towards 100.20 to 99.80 first and then may be lower.

Conclusion

Overall outlook stays bullish.If we keep the technical and price action-studies aside then the negative factors against JPY are the political tensions with the neighbors i.e. China and Korea. In fact mainly China. However, the background effects of these tensions may go in the favor of JPY more than against it. The Japanese governments decision about allowing weapon exports may favor  JPY and the pair may weaken further.