Bullish Trend vs. Resistance, Double Top: USD/JPY was bullish this week, rallying since last Friday’s 102.13 low to a high of 103.96 after the FOMC meeting minutes. This week’s rally broke above the resistance around 103, and puts USD/JPY right under the resistance around 104 – highs from March and April. So far, the market was unable to push dollar-yen above this level, and instead has traded USD/JPY into a double top pattern since the 8/21 session.
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Bearish Scenario: The double top support is at 103.60, and if price can hold above this level, it is simply a sideways consolidation in the near-term, with bullish bias. However, a break below 103.60 opens up some near-term bearish outlook, especially if the 1H RSI falls below 40, which would reflect loss of the prevailing bullish momentum.
Support 1 at 103.20: If the bullish momentum in the 1H chart is gone, we can expect a dip toward 103.20, where the 100-hour SMA resides at the moment. There is also a rising trendline from last Friday around the 103.20 area. Also note a local consolidation around this level. If the RSI dips to 30 while price tests these support factors, look for buyers to revive the uptrend in the near-term, especially if there is a bullish divergence.
Support 2 at 102.80: When you look at the 4H USD/JPY chart, you also see a bullish market going back a few weeks, at least to the August low of 101.50. Based on this rally, the current bearish attempt can extend down to 102.80 and the bullish outlook would still be in play. So, if 103.20 does not hold as support, look for price to retest the previous resistance area around 103, down to 102.80. Here price might meet the 50-period SMA in the 4H chart, August’s rising trendline. Look for the RSI to be around 40 as well. If should not break below 40 if bullish momentum is to be maintained.
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Medium-term outlook: A break below 102.80 would shift the trend from bullish back to neutral. The 104 resistance would hold for the month, and we should see a choppy, consolidation market in September. Otherwise, the pressure remains toward the 104 handle. A break above 104.15 would clear April’s high, and open up the 2014-high at 105.44.
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