USDJPY has been hovering around the 61.8% Fibonacci retracement level of 109.36 of the downleg from 112.39 to 104.44 for the past 10 days, with the 109.70 barrier holding back efforts to break above this key resistance point.
Momentum indicators suggest a near-term breakthrough for the bulls won’t be possible as the stochastics are trending downwards, and the RSI has flatlined. However, both remain above the 50 neutral level so positive forces still have the upper hand.
If the pair manages to bounce off the immediate support at the 61.8% Fibonacci, the bulls are likely to make another attempt to breach the 109.70 resistance level. A successful climb above it would reinforce the bullish picture in the medium term and open the way for the 78.6% Fibonacci of 110.69 before attention shifts to the 112 handle.
However, if the short-term bullish bias continues to weaken and prices slip below the 61.8% Fibonacci, the moving averages (MA) stand ready to halt deep declines, starting with the 20-day MA at 109.10, followed by the 50-day MA at 108.87 and the 200-day MA at 108.70. But should they fail, the next big test will come from the 50% Fibonacci at 108.42.
A drop below the 50% Fibonacci would risk triggering a sharper sell-off, extending the declines towards the 38.2% Fibonacci at 107.48. It would also put an end to the bullish structure in the medium term, switching it back to a neutral mode.
