USD/JPY Technical Highlights:
- USD/JPY finally showing some weakness lately
- A test of an old high could be next up as potential support
Not long ago it seemed as though USD/JPY was going to keep on blowing the roof off, but that is often the case right before something takes a turn or at the least corrects. Now that the momentum has been broken and we are seeing minor technical damage in the near-term, it appears an old high could come into play soon as potential source of support.
The 2015 high wasn’t much of an obstacle last month as it did nothing more than provide a multi-day pause that saw price barely correct. But this doesn’t mean that on a decline from here that it won’t act as a good source of support. The trend is up so it is more likely to act as support than it was to act as resistance.
Looking at the short-term picture, the reason for thinking this level will soon comes into play is simply the fact that we saw a double top, with USD/JPY poking its head up above the April high momentarily, followed by a lower low yesterday from the May 4 low.
This has created a downward near-term trend, which given the extreme we saw on the top-side prior to this development, should mean there is more to go on the downside. First up as support is the April 27 low at 12694, followed by the 2015 high at 12585, only a short distance from that low.
Should we drop to the 2015 high then we will need to monitor price action to determine if that will become a floor for a pullback. Too early to say, first up is focusing on the current price action. To negate the above outlined outlook we would need to see a strong pop and failure to decline.
USD/JPY Daily Chart
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—Written by Paul Robinson, Market Analyst
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