USD/JPY Review: Trims gains, rally stalls on overbought conditions

  • Currently, the USD/JPY pair is most overbought since December 2016.
  • The relative strength index (RSI) on the daily, 4-hour and 1-hour chart is reporting overbought conditions.
  • The currency pair has backed off from the six-month high of 102.77.

The USD/JPY pair is most overbought in over 18 months, according to the 14-day relative strength index (RSI).

The RSI, one of the most widely followed technical indicators, is hovering at 75.00 - the highest level since December 2016, meaning the rally is overdone and could be due for a healthy pullback.

Interestingly, the RSI on the 4-hour chart is also flashing overbought conditions. Meanwhile, the hourly RSI is rolling over from the overbought territory (above 70.00), indicating a scope for a correction.

Further, the Chinese Yuan is also showing signs of life. The USD/CNH (offshore Yun) is now trading at 6.6765 per dollar - down 0.20 percent from the previous day's close of 6.6919. Hence, USD/JPY could be in for a minor pullback as the Japanese Yen has been closely following the action in the Chinese Yuan and other Asian currencies since last few days.

USD/JPY Technical Outlook

Hourly chart

Spot Rate: 112.58

Daily High: 112.77

Daily Low: 112.47

Trend: Bearish divergence, correction likely

Resistance

R1: 112.77 (session high)

R2: 113.00 (psychological hurdle)

R3: 113.23 (200-week moving average)

Support

S1: 112.47 (session low)

S2: 111.98 (50-hour moving average)

S3: 111.42 (100-hour moving average)

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.