USDJPY has been underperforming in the past six days following the pullback on the six-month high of 113.16, achieved last Thursday. The prices seem to be in a negative correction mode as it dived below the 20- and 40-simple moving averages (SMAs) in the daily timeframe, suggesting bearish pressure. The short-term technical indicators are bearish and point to more weakness in the market.
Having a look at the momentum indicators, the RSI is moving south below the threshold of 50 and is approaching the 30 level. Moreover, the stochastic oscillator continues the bearish movement and holds in the oversold zone, while the MACD oscillator dropped below its trigger line and is falling in the positive territory with strong momentum.
If price action remains below the short-term moving averages and the 23.6% Fibonacci retracement level of the upleg from 104.60 to 113.16, around 111.14, there is scope to hit the 110.25 support level. Clearing this level would see additional losses towards the 38.2% Fibonacci mark of 109.10 but the price would first need to slip below the 200-day SMA, near the 110.00 psychological level.
However, if the 23.6% Fibonacci resistance fails, then the focus would shift to the upside again towards the 113.16 peak. This is considered to be a strong resistance area which has been rejected a few times in the past. Rising above it would see prices re-testing the 113.70 barrier, taken from high on December 2017.
To sum up, USDJPY is trying to break below the medium-term ascending trend line, which has been holding since March 23 and if there is a closing day below that obstacle would open the way for a new bearish rally.
