USDJPY bears are set for another challenging battle with the tough 104.00-104.20 base, which has been strongly rejecting selling pressure since July, keeping the pair in a sideways move.
The latest downfall has sent the price back below its downward-sloping simple moving averages (SMAs), while in momentum indicators, the RSI has yet to touch its 30 oversold mark, flagging additional negative corrections.
Still, sellers may not take the wheel unless the 104.00-104.20 floor collapses, in which case the six-month old downward pattern from the 111.70 peak could strengthen towards the 103.00 level. Moving lower, the price may next target the bottom of the descending channel currently seen around 102.26.
In the event that bearish forces get exhausted above 104.00, the pair may attempt to rally beyond its 20- and 50-day SMAs, which encapsulate the 23.6% Fibonacci of the 109.84 – 103.99 downleg, at 105.37. Crossing that border, the bulls would aim for a decisive close above the channel’s surface, where the 38.2% Fibonacci of 106.22 is also placed. If those efforts prove successful, an extension towards the 50% Fibonacci of 106.90 and the 200-day SMA may eliminate downside risks in the market, switching the negative medium-term outlook to neutral.
Summarizing, USDJPY is currently testing a crucial support zone, where a significant violation would further dampen the outlook in the short- and medium-term timeframes.
