Analysis

USD/JPY Forecast: Inverted bear flag signals potential for fresh sell-off

4-Hour chart

Support

111.55 (flag support)

111.26 (50-DMA)

110.23 (May 18 low)

109.87 (200-DMA)

Resistance

111.84 (10-DMA)

112.54 (100-MA on 4-hour)

113.00 (zero figure)

114.37 (May 10 high)

  • The loss of bullish momentum as indicated by the MACD and the breach of the rising trend line on the RSI suggests the spot is likely to see a downside break from the inverted flag pattern.
  • Inverted flag is a bearish continuation pattern, thus a downside break would indicate the sell-off from the high of 114.36 has resumed. The pair could revisit the recent low of 110.23.
  • On the higher side, only a break above 112.32 (falling trend line on 4-hour + flag resistance + 50% Fib R of June 2015 high – June 2016 low) would revive the bullish view and open doors for a revisit to 114.36 levels.
  • Also note, the daily RSI is struggling to rise above 50.00 (neutral level).

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