USDJPY added a new low at 103.99 to its downward pattern before bouncing up to the 105.00 territory, turning the six-month picture more bearish.
Meanwhile, the fast stochastics, which have confirmed a bullish cross below the 20 oversold level and are sloping upwards now, are suggesting that the ongoing upside correction may continue in the short-term. The price itself is also hinting that the recent downward move is overstretched after testing several times the lower Bollinger band, with the rising RSI backing this view too.
How far the price may travel may initially depend on the 20- and 50-day simple moving averages (SMAs), which have been persistently rejecting upside movements over the past two months. Then, slightly higher, the restrictive area around 106.20, where the 38.2% Fibonacci of the 109.84-103.99 downleg is placed could next come to the rescue before the spotlight turns to the 50% Fibonacci and the 107.00 level. A decisive close above the latter would push the pair above the descending channel and mark a higher high on the chart, increasing hopes that the bearish phase may have bottomed out.
Should the pair slip below 104.00 again, the door would open for the 103.00 round level. Another step lower may stall around the 102.26 barrier and if this fails to hold, the selling pressure may accelerate towards the 3 ½-year low of 101.17.
In brief, the recent decline in the price has reinforced the bearish outlook in the medium-term, though in the short-term, the pair seems to have reached oversold levels, hinting at an extension of this week’s rebound.
