USDJPY has been in a slow corrective mode below the 135.00 area so far this week, making investors wonder whether this is another temporary bearish phase within the short-term uptrend.
Although the price is currently seeking new support from its simple moving averages (SMAs) within the 133.75-133.45 region and near its previous highs, the momentum indicators are not looking promising. The RSI has almost erased its latest bounce and is approaching its 50 neutral mark. Likewise, the MACD has lost some ground and is near its red signal line, with the stochastic oscillator pointing downwards as well.
In terms of market structure, a rising wedge seems to be developing. Technically, this is usually considered a bearish trend reversal signal.
If sellers persist, the 38.2% Fibonacci retracement of the previous downleg could immediately attempt to cool downside pressures around 132.80. If not, then the pair might have another opportunity for a rebound between the two ascending trendlines, which connect all the lows from January’s trough, seen between 132.00 and 131.80. A break below the trendlines would worsen the outlook, shifting the spotlight to the March low of 129.63, while a steeper decline could reach the 2023 floor of 128.00-127.21.
In case the bulls return, a decisive close above the 61.8% Fibonacci level of 135.30 and the upper resistance line will be needed for a quick rally up to the March high of 137.90. This was a tough resistance area in November and December too. Therefore, a violation at this point could be a prerequisite for a bounce towards the 140.00 mark.
All in all, USDJPY maintains a series of higher highs and higher lows in the short-term picture despite its latest pullback. A step below 132.45 would downgrade the short-term outlook to neutral. Yet only an aggressive downfall below 130.80 would question the 2023 upward trajectory.
