USDJPY has been underperforming in the past couple of days, breaking back below the key 110.00 level. When looking at the bigger picture the pair has been in a bullish tendency since April 23. The RSI is trying to restore upside movement and the stochastic oscillator is ready to create a bullish crossover within the %K and %D lines.
If price action remains above the 23.6% Fibonacci retracement level of the up leg from 107.47 to 110.20 at 109.55, there is scope to test the 110.20 resistance. Clearing this key level would see additional gains towards the 13-month high of 110.95.
If the 109.55 support fails, then the focus would shift to the downside towards the 109.30 barrier, which, if breached, would increase downside pressure and bring about a reversal of the trend. From here, USDJPY would be on the path towards the 38.2% Fibonacci of 109.15 and the 200-period simple moving average (SMA), which stands near the 50.0% Fibonacci of 108.83.
Overall, USDJPY has been negative since peaking at 110.20. Near-term weakness is expected to remain as long as price action takes place below the red Tenkan-sen line. However, the broader outlook is bullish.
