A level we though may hold a while longer is dangerously close to breaking to the downside, as USDJPY bearish momentum picks up within the larger, bearish channel.
Now trading beneath the 200MA and close to breaching the 105.50 level, we have to readjust our expectations for USDJPY to continue the bearish move set from the 125.60 highs. We originally highlighted the H&S top to target the 105/6 area in December 2015 and, having reached target in May whilst Bank of Japan verbally intervened, though there was a strong chance of a rebound higher and possibly end the correction.
With prices so close to breaking the May low, the odds of a break low are greatly increased and for the potential to target 105.40 and 103.10 within the bearish channel. Quite how far Bank of Japan will be willing to let it slip without at least causing some whipsaws along the way remains to be seen but, sticking to price, the trend favours further downside.
As we approach the 105.50 level, price is showing potential to form a bullish wedge. This is not too surprising as prices do tend to slow their momentum when approaching such an important level. However, if it is to become a bullish wedge pattern it still looks quite young, which would apply a break below 105.50 before prices were to spike higher. If we are to see prices rebound we still prefer to keep an eye on short position and fade into any resistance zones if bearish patterns present themselves.
The reason we now see a break low is because the decline form the 111.40 highs appears to be impulse, which favours any upswing as merely a retracement against a larger move down.
A break below 105.50 could see the pair move towards 105.40 monthly S2 with a break lower likely to target somewhere along the lower channel line. 103.11 becomes the next area to consider for prices to stall as this is where the monthly S2 sits. If this level is to work in tandem with the lower channel as support then this could assume prices to eventually find support around the 22nd June.
|Resistance 3:||111.44||30/05 high|
|Resistance 2:||109.17||Monthly pivot, 50MA|
|Resistance 1:||107.88||06/07 high, bullish wedge target|
|Support 1:||105.50||Historical S/R level, Weekly W2|
|Support 2:||104.50||Weekly S3|
|Support 3:||103.10||Lower channel support, 04/14 swing high|