Richard Perry
Independent Analyst
USD/JPY
After days of negative pressure, the bulls spectacularly responded on Friday to leave a low at 104.17 and form a huge bullish engulfing candlestick. Given the incredibly stretched sell-off on the dollar, such a move may not have been so surprising. However, it will be how the bulls react in the first few days of this week which will be far more telling. With a weekend to let the dust settle, will this be just a “dead cat bounce” before the selling simply resumes? The breakdown of the old key floor of 106.00 has left significant overhead supply between 106.00/106.60 and is was notable that the rebound faltered within this band on Friday. Once more this morning, this seems to be resistance as an early move higher has already dissipated at 106.43. The near term threat is still with the rebound though as stretched momentum has further room to unwind. If the RSI unwinds back towards 50, with the significant overhead supply of sellers, it would still be seen as another opportunity to sell? Only above 107.50 would shift this view now.
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