(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)
Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle to 112.22, and is now seen retreating.
Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.
Currently, the pair trades +2.34% on the month.
Partially altered outlook from previous analysis –
The combination of a channel resistance from 108.47 and supply at 112.66/112.08 held price action lower at the tail end of the week. Follow-through selling was seen Monday, stretching to lows of 110.33, now poised to challenge a fresh area of demand at 109.52/109.99, typically labelled a ‘rally-base-rally demand’.
The RSI indicator also voyaged into overbought terrain in recent trading, with Monday exiting lower.
Leaving supply at 112.63/112.25 unchallenged, USD/JPY continued to explore lower ground Monday, breaching channel resistance-turned support (109.98) and bottoming a touch north of a supply-turned demand area at 110.02/110.23. Note this area also converges with channel support (108.31)
Despite strong moves lower Monday, early trade this morning is attempting to claw back recent losses, now crossing paths with the underside of 111 after finding a ‘floor’ off 110.50. A move above 111 has demand-turned supply seen close by at 111.32/111.49, shadowed by 111.50. In addition to this, as of current price, the 100/50-period SMAs are seen intersecting with the said zone.
Knowing we have room to push lower from daily supply at 112.66/112.08, with weekly price holding south of structure, bearish themes could be in store today, either off the 111 handle or demand-turned supply at 111.32/111.49.
Disclaimer: The information contained in this material is intended for general advice only.