- USD/JPY staged a modest bounce from multi-month lows amid extremely oversold conditions.
- The lack of follow-through suggests that the near-term bearish bias is still far from being over.
- Bears might now wait for a sustained breakthrough the 104.00 mark before placing fresh bets.
The USD/JPY pair recovered around 70 pips from multi-month lows and refreshed daily tops, around the 104.85 region in the last hour.
Extremely oversold conditions on short-term charts turned out to be a key factor behind the pair’s modest intraday short-covering move. This coupled with a positive move in the US equity futures further undermined the safe-haven Japanese yen and remained supportive.
The uptick, however, lacked any strong follow-through and remained capped below the key 105.00 psychological mark. The pair’s inability to capitalize on the attempted bounce clearly suggests that the near-term bearish pressure might still be far from being over.
That said, a sustained breakthrough the 105.00 mark might prompt some additional short-covering and lift the pair further towards an intermediate resistance near the 105.65-70 region. Bulls might then aim to test weekly swing highs resistance near the 106.00-106.10 area.
On the flip side, the 104.20-15 region now seems to protect the immediate downside. Subsequent weakness below the 104.00 mark will reinforce the near-term bearish outlook and turn the pair vulnerable to accelerate the slide further towards challenging the 103.00 mark.
USD/JPY daily chart
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Technical levels to watch
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