USD/JPY Forecast: Watch out for failure at/break above Inverse Head & Shoulders neckline
|4-hour chart - Inverse head and shoulders
Daily chart
Resistance
109.07 (inverse head and shoulders neckline)
109.34 (10-DMA + 4-hr 50-MA)
110.10 (Mar 27 low)
Support
108.74 (200-DMA)
108.32 (support on the 4-hour chart)
107.95 (falling channel floor)
107.49 (July 21 high)
Pair’s higher low formation (Monday - 108.13, Tuesday - 108.32, Wednesday - 108.37) coupled with an oversold RSI suggests the sell-off from the March 31 high of 112.20 may have run out of steam.
However, only a break above the inverse head and shoulders neckline (on 4-hour chart) would add credence to the higher low formation and breach of the falling trend line on the daily RSI and open doors for a rally to the resistance offered by the descending trend line (seen on the daily chart) around 109.75-110.00 levels.
Watch out: Repeated failure at the inverse head and shoulders neckline followed by a bearish breakdown of the falling channel would signal the continuation of the sell-off, in which case a major support at 107.49 (July 21 high) could be put to test.
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