USD/JPY bears show their strength but is it enough for a downleg? [Video]
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USDJPY in the green today after a strong red candle.
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Bears took advantage of USD weakness in the market.
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Momentum indicators have reached a crucial stage.
USDJPY is higher today, bouncing off the lower boundary of the ascending trending channel that has been in place since mid-March. Today’s reaction is partly the response from the USDJPY bulls to yesterday’s sizeable red candle. With Japanese authorities sticking to verbal intervention and the BoJ disappointing, market participants are fighting for the upper hand in USDJPY, resulting in an impulsive market.
In the meantime, the momentum indicators have reached a critical stage. The Average Directional Movement Index (ADX) is stuck below its 25-threshold and thus signals a trendless market. On the flip side, the RSI continues to hover above its 50-midpoint for the fourth consecutive month, revealing persistent bullish pressure. Crucially, the stochastic oscillator is gradually moving lower and preparing to test the resistance set by its moving average (MA). A break below the MA would be seen as a strong bearish signal.
Should the bulls remain hungry, they could try to confidently keep USDJPY above the 150.15 level. They could then have the chance to break the October 21, 2022 high at 151.94 and record a new 2023 high.
On the flip side, USDJPY bears are probably keen on finally breaking the lower boundary of the trending channel and the October 3, 2023 high at 150.15. If they are successful, they could have a go at pushing USDJPY below both the 50-day simple moving average at 149.35 and the August 11, 1998 high at 147.71 respectively. Even lower, the path appears to be clear until the 144.99-146.65 area.
To sum up, USDJPY bears have finally shown some signs of life, but the battle goes on as the bulls remain committed to breaking the 151.94 level and recording a new 2023 high.
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