What lies ahead?
In trading last week, the USDJPY fell below the 100 day moving average at 119.26 (blue line in the chart below) on Wednesday and closed below the level over the next few days. Prior to the last 3 closes, there has been only been one other close below the 100 day moving average going back to August 8, 2014 That occurred earlier this month on April 3rd.
The price of the USDJPY has been confined in an increasingly narrow trading range since peaking in December (see daily chart below). The high over the period was reached on March 10th at the 122.015 level. The low goes back in December 16th at 115.55. Since February 9, the range has been a more narrow 118.22 to 122.01. Something has to give.
The fall below the 100 day MA last week has tilted the bias to the downside for the pair. The low since then was reached today at 118.52. This took out the low from Friday at 118.55 by a mere 3 pips. The failure to extend on the new lows, disappointed traders and the pair has been moving higher since then. The sellers are not ready to test and explore what life is like below the 118.22 level - at least not yet.
Looking at the hourly chart, the move higher has the pair back up testing the 100 hour moving average (blue line in the chart below). That MA comes in at 119.135 currently. The high for the day peaked at 119.032.
Today is shaping up to be a key test for the 100 hour MA and possibly the 100 day moving average as well. If the pair is to keep the bearish bias, staying below these two moving averages will be the key lines in the sand to hold. Failure to do so, and I would expect that the 119.678 level (where the 200 hour MA and 50% of the move down from the April 13 level) will be the next target area.
So far, the correction higher, has respected the 100 hour MA/100 day MA. They represent the "big test" for the market this week. The buyers may have an advantage from the lows today, but the sellers have showed up where they needed to. So I have to give the advantage to the sellers.