USD/JPY Technical Analysis:
Downbeat risk sentiment supported a safe-haven bid on the Japanese yen and US government bonds (US yields fell across the curve), leaving USD/JPY on the ropes on Monday.
The near-term technical landscape has H1 seeking lower levels below the ¥115 figure, with room to extend losses to an H1 decision point at ¥114.57-114.74. This is supported on the H4 period. After a bearish position of trendline support turned resistance, extended low ¥113.47, and a 61.8% Fibonacci retracement at ¥115.64, support is not expected on this timeframe until ¥114.57: A bullish formation H4 AB=CD (black downward arrows) completing a 61.8% Fibonacci retracement ratio.
From the perspective of higher timelines, a limited change is evident (in italics):
The trend of this market favors buyers at the moment. The currency pair has been rising since the start of 2021, clearly visible on the weekly time frame. With this in mind, the overall longer-term trend has been up since 2012 (check the monthly time frame). The 21.5% correction from June 2015 to June 2016 provided a buying opportunity, as did a subsequent 14.8% correction from December 2016 to the pandemic lows formed in early March 2020.
The 1.272% Fibonacci projection of the weekly time frame, as you can see, has remained a headwind since the start of this year. Should the sellers strengthen their grip, weekly channel support, extended from the ¥102.59 low, could be an area we see entering the frame.
In the meantime, the daily chart has been tracing an ascending triangular pattern (generally seen as a continuation arrangement) since December 2021 between Quasimodo resistance at ¥116.33 and an ascending line drawn from the 112.53 low. ¥. The ¥116.33 reversal would allow analysts to plot a pattern profit target by extending the “baseline” distance (blue vertical box) from the breakout point. Retreating below the ascending line, however, seat supply turned demand from ¥112.66 to ¥112.07 into the picture.
Not only is the zone in the company of a 78.6% Fibonacci retracement at ¥112.00 and a 50% retracement from ¥112.55, but technicians will recognize the 200-day simple moving average widely watched housed in the lower limit of the area at ¥112.27.
Note that the Relative Strength Index (RSI) is also testing support between 40.00 and 50.00 (a “temporary” oversold range since May 10 – common view in trending markets).
In the short term, a retest at the lower level of ¥115 could be seen on the H1. Holding below this level may encourage a bearish scenario towards the H1 decision point at ¥114.57-114.74 (sitting atop the H4 Fibonacci support at ¥114.57).