The USD was unable to retain its strength from last week, which came after the FOMC statement. The USD/JPY for example found resistance under the recent consolidation range resistance. The 4H chart shows the consolidation price action since April that formed a range roughly between 118.50 and 120.74.
USD/JPY stalled at 120.50 this week and retreated before reaching the 120.75 high. As we get into mid-week trading, USD/JPY is trading in the middle of the range. If price holds above 119.50 and can rebound above 120 today, USD/JPY would starting developing bullish bias. Otherwise, the pressure is on 118.50 support area from last week again.
If price does approach 118.50, don’t be surprised if price pushes lower. The fact that the pair failed to reach 120.75 could be a sign that bulls are exhausted. I would therefore limit the bullish outlook from 118.50 to 119.50.
The daily charts that the 118.30-118.50 area is not only April’s consolidation low, but also the central pivot area of the multi-month consolidation range between roughly 115.56 and 122. So far in April, there was bullish bias with price holding above 118.50 for the most part. Now if bulls are “exhausted” as we assessed above, the 118.30-118.50 area would be vulnerable. A break below this area, opens up further bearish outlook in the short-term. This bearish outlook should be limited it to 115.56-116.00, which represents a multi-month consolidation rage support area.. A break below 115.50 will be needed to show a true price top and signal a significant bearish correction.
Given the current monetary policy stances from the FOMC and the BoJ, we should expect EUR/USD to maintain a sideways market and provide support at 115.56-116 if not the 18.30-50 area.
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