USD/JPY traded lower on Tuesday, hitting a new nine-month low at 102.60. That said, during the Asian session today, the pair rebounded somewhat. Overall, the pair continues to trade below the tentative downside resistance line drawn from the high of November 11th, as well as below all three of our moving averages on the 4-hour chart. Thus, we would consider the near-term outlook to be negative at the moment.
We see the case for the current rebound to continue for a while more, perhaps for the rate to test once again the resistance of 103.25, marked by Monday’s high. However, we believe that the bears may take charge again from near that zone, and perhaps push the battle lower for another test near the 102.60 zone. A break lower would confirm a forthcoming lower low and may carry larger bearish implications, perhaps paving the way towards the low of March 9th, at 101.17.
Shifting attention to our short-term oscillators, we see that the RSI rebounded from near its 30 line, while the MACD, although below both its zero and trigger lines, shows signs of bottoming as well. Both indicators detect slowing downside speed, which supports our view for some further recovery before the next leg south.
Now, in order to abandon the bearish case and start examining a bullish reversal, we would like to see a strong break above 103.90, marked by the high of December 28th. The rate would already be above the aforementioned downside line and may initially climb towards the peak of December 15th, at 104.15. Another break, above 104.15, may allow advances towards the high of December 10th, at 104.57, or the high of December 2nd, at 104.75.
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