USD/JPY analysis: latest bounce not enough to offset the dominant bearish trend

Valeria Bednarik FXStreet

USD/JPY Current price: 111.31

The USD/JPY pair fell to a fresh yearly low of 110.63 last Friday, undermined by poor US data and news that the US government pulled back from the Congress the healthcare bill, before facing a defeat, as the Republicans were unable to gather enough support. The pair however, bounced some 60 pips, and closed the week in the 111.30 region, as risk aversion eased following Trumps speech in the Oval Office, announcing that they will now focus on the tax reform. Wall Street bounced from its lows after the news, whilst US Treasury yields also recovered some ground, but anyway closed in the red for a second consecutive week. Also weighing on the pair was a tepid advance in US Durable Goods Order in February, and worse-than-expected flash Markit PMIs, showing the slowest pace of expansion in six months. Japan will release its latest inflation figures this upcoming Thursday, alongside with preliminary industrial data for March and employment figures for February. The pair is still at risk of falling further, as in the daily chart, it settled well below its 100 SMA, now flat around 114.50, whilst the Momentum indicator maintains is bearish slope within bearish territory, and the RSI indicator is barely bouncing from oversold readings, now around 33. Furthermore, the pair has met selling interest around 111.60, where the pair bottomed multiple times earlier this year. In the 4 hours chart, technical indicators have bounced from oversold readings, and the Momentum indicator heads north above its mid-line, but the price remains well below its 100 and 200 SMAs, both converging around 113.30/40. The upward corrective movement can extend up to 112.00, a major Fibonacci resistance, without actually affecting the dominant bearish trend. Renewed selling interest below 111.00 should favor a steeper decline towards 109.90, the 50% retracement of late 2016 monthly rally.

Support levels: 111.00 110.70 110.30

Resistance levels: 111.60 112.00 120.45

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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