USDJPY maintains its neutral picture in the medium term after it bounced sharply last week from near the key 108-area which acted as the lower end of the range that was established over the past 6 months.
After a strong rally from 107.31 last Friday, prices hit 110.72 today. USDJPY is now being capped by the 50-day moving average near this level. The market’s upward trajectory has slowed down as can been seen in the flat RSI and MACD, warning that there is risk of a pullback. Failure to record a daily close above the 50-day MA would add to near-term corrective risks and would shift the focus back to the downside.
Immediate support lies at 109.91, which was yesterday’s low. It is also the 50% Fibonacci retracement level of the rise from 101.18 to 118.66 (November to December 2016 upleg). A move below this would target the bottom of the 6-month range near the key 108 level. Further weakness would push the market out of the range and shift the medium-term trend to bearish from neutral.
A sustained move from current levels towards the 38.2% Fibonacci level at 111.94 would help improve short-term prospects for USDJPY for further gains towards 114.49 (July 11 high and 23.6% Fibonacci). This is the top of the range and so breaking above this level would shift the trend to bullish.
Bearish trend indicators and flat momentum signals on the daily chart are pointing to more range trading ahead. The 200-day MA is horizontal while the RSI and MACD are lacking direction, suggesting little impetus for a break out of the range at the moment.