The Kuroda rally and oversould bounce lead USD/JPY to test resistance near our technical level to get short, or 120.88. USD/JPY did a little better that day, but failed intraday near the 200d moving average.
This failure also aligned with the failure to break back above a long term trend line that was support and is now resistance. In our January 28th report, we highlighted mutliple trending indicator are pointing lower for USD/JPY and we’d like the opportunity to sell it on a bounce.
The signals included, and still do, a bearish Ichimoku cloud cross, the most bearish momentum seen in four years according to RSI and the MACD and Signal line both turning negative.
On a weekly closing basis, price closed below major support at 118.40 creating a descending triangle top pattern.
This pattern estimates USD/JPY may trade down to 111.90 with temporary support pocket between 115-116.
We maintain our bearish trend view on USD/JPY.
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