The short-term bullish phase that started on June 14 has stalled at a high of 113.67 reached on July 5. The subsequent corrective move lower is not surprising since the market reached overbought conditions as indicated by the RSI reaching near 70.
The key psychological level at 113.00 appears to be supportive, as USDJPY has been closing above this level all week. If prices fall below this level and continue to decline, then the next support level at 111.80 comes into view. This happens to be the 38.2% Fibonacci retracement level of the upleg from 108.77 to 113.67. A further decline risks a break below the 50% Fibonacci at 111.22, which would lead to a retracement of more than half of the uptrend from June 14 and would change the trend.
For now there are no signs yet of a shift in the short-term uptrend, as the market is above both the 50-day and 200-day moving averages, which are still pointing north and are positively aligned, while the shorter-term MA is above the longer-term MA. The RSI is in bullish territory above 50. However, it has flattened, suggesting that a consolidation phase is possible in the near term.
Should USDJPY regain its upside momentum, there is scope to re-test 113.67. Surpassing this peak would open the way towards the May 10 high of 114.36. This move would help strengthen the upside momentum and bring a resumption of the uptrend to target the key 115.00 level.
While the short-term market structure remains bullish, in the bigger picture, USDJPY has been neutral since March. The market needs to rise above 115.00 in order to provide a stronger bullish outlook.
