USDJPY: Technical Indicators Warn Rebound Over

Key Takeaways

• USDJPY breaks an important bullish trend line

• Support at 102.00 (50% Fib ext.) and resistance at 102.50 (100 hourly SMA)

• US New Home sales plunge 14.5% in March

• US manufacturing PMI misses forecast of a rise to 56.0

A US dollar rebound against the Japanese Yen may be ended after prices breached an important bullish trend line along with the hourly 100 simple moving average. USDJPY found support around a confluence area of 200 hourly SMA and 38.2% fib ext. at 102.20.

USDJPY downside pressures remain intact. Yesterday’s incoming economic data was disappointing, as the US new home sales in March registered the 3rd biggest monthly drop over the last 20 years.

Technicals

USDJPY traded below a critical short term bullish trend line, as the Japanese yen gained bids against the US dollar. USDJPY traded up and down but failed to climb above the previous high at 102.70. As a result, the sellers took control and breached both 100 and 50 hourly simple moving average. The pair dropped close to 38.2% Fibonacci retracement level of the last major bull wave from 101.30 low to 102.70 high.

There is a minor divergence noted on the RSI, which resulted in a pullback earlier during Asian session. However, the pair was seen struggling around a confluence zone of 100 and 20 hourly SMA.

Fundamentals

Yesterday, the US New Home Sales and manufacturing PMI figures were published by the US Census Bureau and Markit Economics respectively. Sales of new single-family houses in March 2014 were at a seasonally adjusted annual rate of 384,000, according to the report published. This is 14.5 percent (±12.9%) below the revised February rate of 449,000 and 3rd biggest monthly drop over the last 20 years. Moreover, the US manufacturing PMI came in at 55.4, missing expectations of 56.0. The report highlighted that the production rose at the fastest pace for just over three years in April with manufacturers indicated a robust start to the second quarter of 2014.

Looking Ahead

Overall the market sentiment tilted in the favor of more losses in USDJPY. So, as long as the pair stays below 102.70 USDJPY might dip back towards 102.20 level, followed by 101.90 (Next trend line).