USD/JPY Price Forecast: Long-term trend could be reversing but bearish momentum lacking

USD/JPY has broken to new lows, indicating a possible reversal in the long-term trend.
The move lacks momentum, however, and risks running out of energy before a pull back higher.

Joaquin Monfort FXStreet

USD/JPY has made a bearish break below the key August 5 lows. Although the move down lacks momentum the break could be indicative of a long-term trend reversal.

USD/JPY Daily Chart

The pair has already broken below a major multi-year trendline, suggesting the long-term uptrend has been undermined. The break below the August 5 lows confirms it might have reversed. Given it is a principle of technical analysis theory that “the trend is your friend” such a break increases the odds of more downside evolving in the future.

Strong support comes in at 140.25 (December 2023 low), however, and this could slow the pair’s descent. A break below that level too, would provide even more confirmatory evidence of a reversal in the trend. Such a break might see price fall to the next target at 137.24 (July 2023 low).

USD/JPY is showing bullish convergence between the price and the Relative Strength Index (RSI). At the August 5 bottom, the RSI was in the oversold zone, now even though price has sunk to a lower low, RSI has not.

This could be a sign that the move down lacks bearish conviction and suggests a risk of a rebound higher.

Author

Joaquin Monfort

FXStreet

Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.

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