USDJPY has fallen out of the rising channel on Tuesday making a big tumble after rising for the past two weeks.
The decisive break below the lower channel line triggered the pair’s downside move below the key 113.00 level to reach 112.20 by early Wednesday. Prices failed to close above resistance provided by the 50-day moving average and the 23.6% Fibonacci retracement level (113.50) of the February to March decline from 121.68 to 110.96. There is scope for prices to fall towards the key 111.00 level and retest the March 17 low of 110.65. A sustained decline below this low could trigger the pair’s downside momentum to 110.00.
The momentum indicators are signaling bearish tendencies as RSI is falling and is below 50, and the MACD is below zero. All the moving averages (50, 100 and 200-day MA) are falling while the market is below them. This also highlights the underlying bearish bias.
In the medium term USDJPY is neutral in a range between 111.00 and 115.00. A sustained move above the top of the range would shift the bias from neutral to bullish but a break below the lower range would bring a bearish bias that has been in place since the end of 2015.
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