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  • USD/JPY recovers to 105.55 from multi-month lows reached Monday. 
  • The hourly chart shows a bullish divergence of RSI.

USD/JPY is currently trading at 105.55, representing a 0.18% gain on the day, having put in a 4.5-month low of 105.12 on Monday. 

The bounce could be attributed to the expectations for endless monetary and fiscal stimulus and risk reset in the Asian equities. 

The pair could rise further to the 50-hour simple moving average (SMA) at 105.73, as the hourly chart now shows a bullish divergence of the relative strength index. A bullish divergence occurs when an indicator charts higher lows, contradicting lower lows on the price chart and is considered a sign of seller exhaustion. 

The overall bias, however, would remain bearish as long as the descending triangle breakdown confirmed on July 27 remains valid. The pattern would be invalidated if the pair rises above 106.18. 

Hourly chart

Daily chart

Trend: Oversold bounce

Technical levels