USDJPY failed to hold gains above the 111 level last week but it refrained from crossing below the 50-day moving average (MA), following a sideway path instead. The pair is developing within the upper area of the ascending channel, while the MACD continues to improve above its red signal line and in positive territory, suggesting that the pair is more likely to hold higher in the short-term. The RSI keeps rising as well but with the indicator trending close to the overbought mark of 70, negative corrections cannot be excluded.
Should the market head northwards, the upper line of the channel which converges with the 200-day MA at 111.30 will be closely watched as any significant step above this area could unleash a stronger rally. If that’s the case resistance could next run towards 112.20, a previous support level, and then straight up to the 113 psychological level. Higher up, another important barrier may appear around 113.70.
On the downside, the 50% Fibonacci of 110.48 of the downleg from 114.54 to 106.45 has been halting downside movements this week and could appear restrictive once again If bearish forces resume. Lower down, a key support could be found at the crossroads of the 20- and the 50-day MAs at 110, while a bigger attention is expected to gather around 109.76 and the bottom of the channel. If the bears manage to drive the price decisively out of the channel and below the 38.2% Fibonacci of 109.53, it would be interesting to see whether the price can cross below 109, the bottom of the Ichimoku cloud, to retest the 23.6% Fibonacci of 108.34.
In the medium-term picture, the outlook remains negative as long as the market holds below 111.37. The bearish cross between the 50 and the 200-day MA, however, signals that things could turn worse before getting better in the medium-term.
