USD/JPY Price Forecast: Makes lower lows as trend turns more bearish

USD/JPY continues sliding and makes a lower low at 140.36 on Friday, bottoming out at about the same level as the key December 2023 low – where it is expected to encounter firm support. 

USD/JPY 4-hour Chart 

The break below the August 5 low on September 11 crossed an important threshold for the pair. Taken together with the break below the major multi-year trendline at the beginning of August, it suggests a possibility the long-term uptrend has reversed. Given it is a principle of technical analysis that “the trend is your friend” such a reversal suggests the broad bias has shifted from being “bullish” to “bearish”. 

If USD/JPY can make a daily close below the 140.25 December 2023 low, it would provide even more confirmatory evidence of a long-term trend reversal. Such a break might then see price fall to the next target at 137.24 (July 2023 low). It should be noted that the short and medium-term trends are already bearish. 

USD/JPY is showing mild bullish convergence between the price and the Relative Strength Index (RSI). At the September 11 low the RSI was in the oversold zone, now even though price has sunk even lower, the RSI has not. 

This could be a sign that the move down lacks some bearish conviction and suggests a risk of a pull-back evolving. Given the other bearish signs on the chart, however, such a rebound if it materializes is likely to be temporary before the bear trend resumes and takes the pair to new lows.