Richard Perry
Independent Analyst
USD/JPY
The correction on Dollar/Yen continues to develop. A second huge bear candle on Friday has pulled the pair back to eye the congestion of the old Q4 2019 trading lows between 106.50/107.65. The move has now unwound into the realms of the 61.8% Fibonacci retracement (of the original massive 112.20/101.20 sell-off) at 108.00 and the 50% Fib at 106.70. With momentum indicators turning increasingly corrective, the potential for a much deeper correction is growing. A bear cross on Stochastics is confirming a renewed sell signal this morning, whilst RSI is back under 50, suggests that how the market reacts in the early part of this week could be crucial. The huge swings of momentum in the past month open the prospect that now the bears are back in the driving seat, and if volatility remains elevated, a sharp decline could quickly move through the gears. We are seeing ongoing market swings even early this morning, but there is a continuation of the negative bias. We are mindful of the Fib levels, with 50% Fib at 106.70 a target if the 61.8% Fib at 108.00 is breached decisively into the close. The hourly chart shows increasingly corrective momentum, with a downtrend and the market moving lower following the completion of a top below 109.30. The implied move is for c. 107.10 to be tested. Resistance is initially at 108.00 this morning, and a building band 108.20/109.00 growing as key resistance.
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