Bottom line:  USDJPY bearish structure remains intact against 112.22/40 resistance, the February 20, 2020 high. Bears are expected to accelerate the triangle break out towards 94.00 levels.

Technical Analysis:

USDJPY bears are gaining control back as they contain well below the 112.22/40 mark, which is immediate resistance. A corrective pullback rally might test 109.20/30 levels before the drop resumes. A sustained break below 103.50 would confirm and accelerate the drop towards 94.00 levels.

At this point in writing, the USDJPY is seen trading close to fibonacci 0.382 retracement of the recent rally between 101.18 and 111.71 respectively. Temporary support is expected around current levels (107.20/30) and USDJPY might rally towards the 109.00/110.00 handle again, before hitting resistance. A sharp reversal can be expected thereafter, which drags prices lower towards 103.50 levels.

Most traders might be preparing to initiate fresh short positions between 109.50/110.00, with a protective stop above 112.22 and projected targets below 103.50 in the short term. A break below 103.40/50 would extend the drop towards 94.00, going forward.

Alternately, if prices manage to break above 112.22/40 levels (defined as resistance), the bearish structure would be nullified and USDJPY might target higher towards 119.00 levels at least. Probabilities remain less for the alternate scenario to hold true.

We would review the structure again as USDJPY approached closer to the 105.00 handle. This is fibonacci 0.618 retracement of the recent rally between 101.18 and 111.71 and a bullish bounce there would be constructive for bulls to continue pushing higher. It could also prove the recent drop to be just corrective and completing a gartley. Keeping the above probabilities in mind, USDJPY price action would be monitored closely and notified here.

Overall, it is expected to find resistance around 109.50/110.00 handle for now as might be a good candidate to sell on rallies. Bottom line remains 112.22/40 resistance.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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