USD/JPY Review: Trims gains, rally stalls on overbought conditions
|- Currently, the USD/JPY pair is most overbought since December 2016.
- The relative strength index (RSI) on the daily, 4-hour and 1-hour chart is reporting overbought conditions.
- The currency pair has backed off from the six-month high of 102.77.
The USD/JPY pair is most overbought in over 18 months, according to the 14-day relative strength index (RSI).
The RSI, one of the most widely followed technical indicators, is hovering at 75.00 - the highest level since December 2016, meaning the rally is overdone and could be due for a healthy pullback.
Interestingly, the RSI on the 4-hour chart is also flashing overbought conditions. Meanwhile, the hourly RSI is rolling over from the overbought territory (above 70.00), indicating a scope for a correction.
Further, the Chinese Yuan is also showing signs of life. The USD/CNH (offshore Yun) is now trading at 6.6765 per dollar - down 0.20 percent from the previous day's close of 6.6919. Hence, USD/JPY could be in for a minor pullback as the Japanese Yen has been closely following the action in the Chinese Yuan and other Asian currencies since last few days.
USD/JPY Technical Outlook
Hourly chart
Spot Rate: 112.58
Daily High: 112.77
Daily Low: 112.47
Trend: Bearish divergence, correction likely
Resistance
R1: 112.77 (session high)
R2: 113.00 (psychological hurdle)
R3: 113.23 (200-week moving average)
Support
S1: 112.47 (session low)
S2: 111.98 (50-hour moving average)
S3: 111.42 (100-hour moving average)
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