The Japanese yen rallied against the US dollar in the first trading day in the New Year, extending strong advance from 111.40 (26 Dec lower top) into fourth straight day.
Cautious mode on concerns over global growth and signals that Fed would slow the pace of rate hikes in 2019, keep the greenback under pressure and give strong tailwinds to safe haven assets.
Lower global stocks in early Wednesday’s trading and China’s Manufacturing PMI falling below expectations and 50 threshold in Dec, add to yen’s positive tone.
Friday’s break and close below psychological 110 support was bearish signal for USDJPY pair’s extension through 109.58 (50% of larger 104.63/114.54 ascend) and through narrowing weekly cloud (109.68/38) which twists next week and was magnetic.
Bears now eye next pivotal support at 108.41 (Fibo 61.8% of 104.63/114.54), violation of which could generate fresh bearish signal and add to dollar-negative environment.
Indicators on the daily chart are all heading south and strong bearish setup was reinforced by formation of 10/200SMA death-cross, with oversold conditions being so far ignored.
Violation of 108.41 Fibo support would expose 108.11 (29 May trough), with no further obstacles on the way towards 106.97 (Fibo 76.4%).
Corrective action could be anticipated in the coming sessions as daily techs are strongly oversold, but so far without any signal.
Solid barriers lay at 110.00/26 (psychological / 24 Dec former low / falling 5SMA) and expected to ideally cap upticks.
Res: 109.58, 110.00, 110.26, 110.76
Sup: 108.90, 108.41, 108.11, 106.97
