Chart Of The Day - USD/JPY risk of minor mean reversion decline ahead of BOJ

Recent up move of USD/JPY seems overstretched, at risk of a minor mean reversion decline.

Short-term technical outlook on USD/JPY (Fri, 27 Apr)



Key technical elements

  • The minor uptrend of USD/JPY in place since 26 Mar 2018 low of 104.56 has reached a significant short-term resistance zone of 109.45/109.65.
  • The short-term resistance zone of 109.45/65 is being defined by a confluence of elements. The upper boundary of the minor ascending channel from 26 Mar 2018 low, the swing high area of 08 Feb 2018 and a Fibonacci retracement/projection cluster.
  • The daily RSI oscillator is now coming close to an overbought level of 73% from 10 May 2017 which coincided with previous swing highs in price action of the USD/JPY on 10 May 2017, 11 July 2017 and 06 Nov 2017 that led to a significant setback. In addition, the shorter-term hourly RSI oscillator has traced out a bearish divergence signal and it is now breaking below its support at the 47% level; a bearish presignal. These observations suggest that the recent upside momentum of price action has started to abate.
  • The next significant short-term support rests at the 107.80/65 zone which is defined by the former medium-term swing low/high areas of 08 Sep 2017, 21 Feb 2018, 13 Apr 2018, the minor ascending channel support from 26 Mar 2018 low and close to the 38.2% Fibonacci retracement of the on-going up move from 26 Mar low to 26 Apr 2018 high.  

Key levels (1 to 3 days)

Intermediate resistance: 109.45

Pivot (key resistance): 109.65

Supports: 108.95, 108.50 & 107.80/65

Next resistance: 110.85/111.00

Conclusion

The recent up move of USD/JPY seems to be overstretched at this juncture. Therefore, as long as the 109.65 key short-term pivotal resistance is not surpassed and a break below the 108.95 trigger is likely to reinforce a potential minor mean reversion decline towards the supports at 108.50 follow by 107.80/65.

However, a clearance above 109.65 shall see a continuation of the up move to target the next resistance at 110.85/111.00 (the former medium-term swing low area of 27 Nov 2017 & the 61.8% Fibonacci retracement of the multi-month decline from 06 Nov 2017 high to 26 Mar 2018 low.

Charts are from eSignal



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