USDJPY Overview

When you look at the USDJPY pair you are wondering if there is some more room on the downside. Such a long drive down is becoming what technicians call "exhaustion".

Nevertheless, we can see one more push down before a temporary bottom can develop. The reasons for this assumption can be seen in the two attached charts, while the main one is a weekly representation of the price action and the second, as an insert in the left upper corner, is a monthly overview.

Let's look at some points in these graphs:

1. Since 1999, the pair reached the 100-101 area two times already (1-2 blue) and found a great support there. The consequent moves up were of great proportion in both cases, although the second one was less powerful. The pair is now approaching this area for the third time (3 blue).
   
   
2. The Monthly RSI indicator did visit the oversold territory in both previous cases and is now in this same situation (4 blue).
   
   
3. The lower boundary of the main weekly channel governing the pair descent sits now at 101 (5 blue), while the pair itself is near 103 (6 blue). This is why we think the 200 pips could be in the cards as a final and last push down before a reversal, based on historic support, can occur.
   
   
4. The weekly RSI is oversold but not deeply. A small move under the 30 area would not create an overwhelming imbalance (8 blue).
   
   
5. The same can be said about the MACD diff. These levels are not the most oversold ones and could be easily penetrated more (7 blue).

The basic conclusion of all this is:

We can speculate that the pair is on the verge of a great test near the 100-101 area where it will found great support from the past, but before that, we could see one more push to the downside from the current levels of 103.

It is hard to imagine that the pair could break the 100-101 without some sort of rebound in view of the indicators (monthly and weekly) that are already oversold. It seems more probable that the fourth test will be the one that will penetrate this base and that could bring the USDJPY to much lower level.



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About the Author

Moshe Shalom Head of Technical Analysis Department ForexManage Ltd Site: www.forexmanage.com Email: This email address is being protected from spam bots, you need Javascript enabled to view it