USDJPY more bearish or just another dip to the 50% midpoint support level

Technical Analysis

Author: Greg Michalowski | usdjpy

More bearish or a time to buy?

The USDJPY peaked on Monday at 110.91. and bottom on Friday at 108.716. 

If the price closes below the 109.19, the week will end with 4 consecutive lower closes (currently trade at 108.98).  Sound bearish right?  Well on the hourly chart...yes.  

Contributing to the decline this week from a fundamental perspective was mostly geopolitical concerns between No. Korea and the US.  Thankfully it is more "words" vs "sticks and stones" being launched (at least so far), but it helped to send stocks and bond yields lower which helped to put pressure on the USDJPY. The PPI and CPI was also a disapointment on Thursday and Friday.  

Technically on the hourly chart, 
  • The price fell below the 100/200 hour MAs on Tuesday (after a spike on the JOLTs report) and trended away.  Bearish.
  • The correction Wednesday/Thursday stalled against a resistance level at the 110.20 area.  Bearish (see red circled numbers),
  • The fall below a lower trend line on Thursday (stocks were getting hammered and PPI inflation was lower), stayed below that trend line on Friday's corrective move higher. Bearish (green circle 6)
  • The price is closing near the lows for the week
All those reasons are bearish for the pair.

What if you look at the weekly chart. 

If you look at that chart, the price decline this week went down to the 50% of the move up from the 2016 low. That level comes in at 108.839. The low today made it to 108.716 before quickly rebounding.  Back in the week of June 11, the price decline stalled at 108.788.  This weeks lows took out the June lows AND the 50% (by a few pips) BUT failed.  Are the buyers buying the dip?  Bullish.

The reality is the 108.839 level is a key support level. 

So next week will help decide.

I would suspect that barring a gap down on Monday, traders will look to lean against the 50% area and look for a rebound (with a stop below 108.71).  A move below the 108.84 and then 108.71 is more bearish. Look for downside momentum.  

On the topside, if the price moves above the broken trend line (the one that held resistance in trading today) and then the 38.2% at 109.60 (also on the hourly chart), the buyers will be taking more control. Look for a retest of the 100 hour MA.

SUMMARY: So from one perspective the pair is more bearish. From another, this might be the dip area to buy. Next week we will be eyeing the levels to see what the rest of the market thinks. The good news is those levels are pretty clear. So let's see what happens.  
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