Forex Technical Update
76.00 is a psychological support for USD/JPY, while the 75.55 level is the record low. The market has been bearish since being rejected sharply at 78.25 as can be seen in the 4H chart. After breaking below a range support at 76.55, the market continued sharply lower until it got near 76.00. The USD/JPY here is oversold according to the RSI in the 4H chart and price action has started to decelerate.
The 1H chart also the market anchoring out of a previous declining channel, yet it continues to dig deeper. The RSI shows bullish divergence, and volatility has declined. As we dig at 76.00 and perhaps lower toward 75.55, the market will put the prospect of intervention higher. Yet the momentum is bearish so a great amount of tension can be reflected in very indecisive candles and patterns.
For the counter-trend trade plan that considers USD/JPY a range-bound market that is trading near range lows, the upside target is conservative 77.30, the central pivot from the broken range, and aggressively 78.25. From 76.00, it may provide attractive reward to risk, giving the consideration of scaling in if it does reach lower toward 75.55, because it will shift your average entry point lower and translate into better reward to risk given our targets. However, if USD/JPY trades like it has been trading for months, expect some very dead markets like paint drying before a the market can find a short-term bottom.
Fan Yang CMT is the Chief Technical Strategist of IBTRADE and one of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.