USDJPY is neutral after pausing a decline at 108.60. Risk to the downside is high as there was a bearish signal from the crossover of the 50-day moving average (MA) with the 200-day MA on July 18. Momentum indicators are in bearish territory, with RSI below 50 and MACD below zero.
However, the RSI and MACD are no longer sloping down and are moving sideways, suggesting downside momentum has weakened and there is diminished risk for further declines in the near term. Prices are hovering near the key 109.00 level but a daily close below this would shift focus to the downside. First target is the August 18 low of 108.60 ahead of the round number at 108.00. An extension lower from this point would change the big picture and shift the bias to bearish from neutral.
USDJPY would need to rise back above 110.00 resistance to ease downward pressure. The level at 110.90 is an important barrier as it acted as resistance as well as support in the past. From here prices could resume upside towards the 50-day moving average (MA) at 111.33 and 200-day MA at 112.52. A move higher from this point would turn the focus to the July 11 peak at 114.49. This is the top of the medium-term range. Breaking above this area would shift the outlook to bullish.
