USD/JPY Forecast: Eyes 112.48 on H&S breakdown & curve flattening

The Dollar-Yen pair faded the spike to 113.91 yesterday as the 10-year yield dropped amid risk-off action in the equities and the treasury yield curve continued to flatten. The Yen rally continued in Asia, pushing the USD/JPY to a two-week low of 113.03. As of writing, the currency pair is trading at 113.20 levels.

The technical charts show the bears are likely to push the spot down to 112.48 (50-day MA) and more during the next 24 hours.

4-hour chart

The above chart shows:

  • Head and shoulders breakdown... the last 4-hour candle closed below the neckline level of 113.15.
  • Momentum studies signal weakness - the RSI is in the bearish territory and trending lower. The 4-hour 50-MA and 100-MA has topped out. We also see a bearish 50-MA and 100-MA crossover. Further, the last 4-hour candle closed below the 4-hour 200-MA (the MA has shed bullish bias).
  • The head and shoulders breakdown has opened up downside towards 111.56 (target as per the measured height method).
  • However, the ascending 50-day MA could cap losses. Currently, the MA is stationed at 112.48.

View

  • The spot looks set to test 112.48 in the next 24 hours.
  • Further losses towards 111.56 cannot be ruled out, still caution is  advised below 112.48, given the bullis bias of the 50-day MA.

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