USD/JPY Technical Highlights:
- USD/JPY is finally showing some weakness lately
- A test of a former high could be the next potential support
Not too long ago, it looked like USD/JPY was going to keep exploding, but it often does just before something turns around or at least corrects itself. Now that the momentum has been broken and we are seeing minor short-term technical damage, it looks like an old top may soon come into play as a potential source of support.
The 2015 high wasn’t much of a hindrance last month, as it only provided a multi-day break that saw price barely correct. But that doesn’t mean that in the event of a decline from here, it won’t act as a good source of support. The trend is up, so it is more likely to act as support than resistance.
Looking at the short-term picture, the reason to think this level will come into play soon is simply the fact that we have seen a double top, with USD/JPY momentarily crossing its head above the April high. , followed by a low yesterday. from the May 4 low.
This has created a short term downtrend, which given the extremes we have seen on the top prior to this development should mean there is more to do on the downside. First support is the April 27 low at 12694, followed by the 2015 high at 12585, a short distance from that low.
If we do fall to the 2015 high, we will need to watch price action to determine if this will become a floor for a pullback. Too early to tell, the first step is to focus on the current price action. To negate the outlook outlined above, we would need a strong pop and a failure of the decline.
USD/JPY daily chart
USD/JPY Charts by TradingView
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX