Chart Of The Day - USD/JPY potential mean reversion rebound looms

Short-term technical outlook on USD/JPY

Key technical elements

  • The recent plunge of 5.5% from its major resistance of 113.70 (the major descending trendline from Jun 2015 that was retested on Nov 2017) has managed to stall at a major support of 108.30 (Fibonacci cluster + major ascending trendline from Jun 2016) (see daily chart).
  • The daily RSI oscillator has reversed up from its oversold region and still shows potential room for further push up before it reaches its trendline resistance at the 52% level. In addition, the shorter-term hourly RSI oscillator remains positive above its support at the 45% level after its prior bullish divergence signal. These observations suggest at revival of short-term upside momentum which advocates a potential mean reversion rebound to retrace the decline from Nov 2017 high to its recent low of 26 Jan 2018.
  • The intermediate resistance stands at 109.80 (minor swing high area of 26 Jan 2018 & the 23.6% Fibonacci retracement of the decline from 12 Dec 2017 high to 26 Jan 2018 low).
  • The next significant short-term resistances stand at 110.30/45 (38.2% Fibonacci retracement of the decline from 12 Dec 2017 high to 26 Jan 2018 low) follow by 110.80/1110.00 (former medium-term swing low area of 27 Nov 2017 & 50% Fibonacci retracement of the decline from 12 Dec 2017 high to 26 Jan 2018 low).

Key levels (1 to 3 days)

Intermediate support: 109.08

Pivot (key support): 108.30

Resistances: 109.80, 110.30/45 & 110.80/111.00

Next support: 107.40


Therefore as long as the 108.30 key short-term pivotal support holds and a break above the 109.80 intermediate resistance, the USD/JPY is likely to shape a potential minor mean reversion rebound towards 110.30/45 follow by 110.80/111.00 next.

On the other hand, failure to hold above 108.30 should see an extension of the decline to target the next support at 107.40 (medium-term swing low of 08 Sep 2017 & 1.618 Fibonacci projection of the down move from 06 Nov to 27 Nov 2017 projected from 12 Dec 2017).

Charts are from eSignal

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