USDJPY maintains a bearish market structure in the short-term after retracing more than half of the uptrend that took place from the June 14 low of 108.80 to the July 11 high of 114.49. The pair is under pressure with strong resistance at 110.96 – the 61.8% Fibonacci retracement level of this recent upleg.
The risk is to the downside to target the key 110.00 level, which recently acted as support. A break here would see a re-test of the 108.80 low with scope to reach 108.00. A deeper decline below this level would start to change the bigger picture and bring about a bearish outlook from the current neutral one.
USDJPY has been in a neutral phase since April and has been trading in a range between 108.00 and 115.00 following an uptrend that took place from October 2016 until January this year.
Downside momentum in the near-term remains, giving scope for another extension lower since RSI is below 50 in bearish territory and USDJPY is trading below both the 50 and 200-day moving averages. Only a clear break above the 50% Fibonacci resistance at 111.63 would shift the focus back to the upside and dampen the bearish view.
The bearish crossover of the 50-day with the 200-day MA on July 18 is keeping the bearish short-term view in play while the medium-term outlook is still neutral.
