USD/JPY technical analysis: Drops to 4.5-month low, bias remains bearish

• USD/JPY hits lowest since January 15.
• Further losses likely amid escalating trade tensions.

USD/JPY is currently trading at 108.17 – the lowest level since January 15 – and could slip further, as technical studies are biased bearish.

For instance, the spot closed well below 109.02 (May 13 low) on Friday, confirming a bearish lower highs and lower lows pattern. The 5- and 10-day moving averages (MAs) are trending south, indicating a bearish setup.

Further, with the escalating US-China trade tensions, a Fed rate cut by the end of the current year is looking increasingly likely.  

The focus, therefore, is now on the support at 109.77 (Jan. 10 low). That level, however, may come into play after a minor bounce or consolidation as the 14-day relative strength index (RSI) is reporting oversold conditions with a below-50 print. The hourly and 4-hour chart RSIs are also flashing oversold conditions.

Daily chart

Trend: Bearish

Pivot levels