USDJPY recorded a stunning sell-off rally last week and the bearish movement continues this week, with the price diving several times below the 108.65 support level. On Tuesday, the pair posted a five-week low of 108.10 and currently is trading slightly above this trough. The momentum indicators are endorsing the bearish structure in the short-term as both, the RSI and the MACD, are moving lower.
In the daily timeframe, the RSI indicator is pointing to the downside below the threshold of 50, while the MACD oscillator is falling below its trigger line and near the zero line. As a side note, the price is developing below the 20- and 40-simple moving averages (SMAs) at the moment of writing.
In case of further declines in the pair, immediate support may be found near the latest lows at 108.10. A downside break of that zone would open the way towards the next support near the 23.6% Fibonacci retracement level of the downleg from 118.60 to 104.60, around 107.80. If sellers manage to push below that hurdle too, that would drive the price until the 105.65 barrier, increasing the probability for further bearish extensions.
On the flip side, if the bulls retake control, price advances may stall initially near the 38.2% Fibonacci mark of 109.94, and subsequently near the psychological figure of 110.00. A potential upside violation of this handle would push the price higher until the 111.40 resistance level.
When looking in the longer timeframe, USDJPY has been trading within a channel tilted slightly to the downside since December 2016.
