Since last week, USD/JPY has been retreating from its new high on the year of 121.84. As we get into the 12/16 US session, the pair continues to sputter in a falling channel, as we can see in the 4H chart.
Note that price has fallen below the 200-, 100-, and 50-period SMAs in the 4H chart. The 4H RSI has tagged 30, showing bearish momentum in this time-frame.
At this point, the USD/JPY is bearish and should find resistance if pulls up to 118. A break aback 118 however, would push USD/JPY above the falling channel, and would be the first sign of a bullish continuation.
Otherwise the pair has downside risk towards a support/resistance pivot area around 114, which is also where the 50-day SMA resides. On the daily chart, we should also anticipate buyers when the RSI approaches 40. If the RSI does indeed hold above 40, it would reflect maintenance of the bullish momentum.
The US Dollar is indeed in a short-term bearish trend (since last week). The EUR/USD is rebounding from its low on the year of 1.2247. After stalling at 1.2495, it traded in a triangle for a few sessions. During the 12/16 European session, we had some mixed manufacturing and services data out of the Eurozone. The market broke above the triangle after the data releases. This move does not seem to be driven by the data points, but rather a USD-story as we are seeing the USD slip across most majors.
Key Resistance: The daily chart shows the pair breaking above a wedge pattern and now testing the 50-day SMA. Indeed, there is some near-term upside risk towards the 1.26-1.2610 support/resistance area. Then if the market breaks above 1.2610, the 1.2760-1.2770 area presents a key resistance. Here ,the market is likely to be challenged by a previous resistance area, a falling trendline, and the 100-day SMA. The daily RSI is likely to approach 60, and if the market is to remain bearish, the daily RSI should hold below 60.
A break above the resistance factors around 1.2765 would up the 1.28870 level, and would confirm a shift from bearish to at least a neutral mode.
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