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  • USD/JPY was seen consolidating its losses near two-week lows, around 103.00 mark.
  • The formation of a descending channel points to a well-established bearish trajectory.
  • The pair seems vulnerable to challenge the channel support, near the 102.60-55 area.

The USD/JPY pair now seems to have entered a bearish consolidation phase and was seen oscillating in a range around 103.00 mark, just above two-week lows set on Wednesday.

Looking at the technical picture, the pair has been trending lower over the past four months or so along a downward sloping channel. This, in turn, points to a well-established downtrend and supports prospects for further weakness.

The negative outlook is reinforced by the fact that technical indicators on the daily chart have been struggling to recover from the bearish trajectory. However, year-end thin trading volumes held bearish traders from placing fresh bets.

Nevertheless, the USD/JPY pair remains vulnerable to slide further below December monthly swing lows and aim to challenge the lower boundary of the trend channel. The mentioned support is currently pegged near the 102.60-55 region.

Some follow-through selling will mark a fresh bearish breakdown and set the stage for an extension of the depreciating move. The USD/JPY pair might then accelerate the slide to the 102.00 mark before eventually dropping to test 2020 lows, around the 101.20-15 region.

On the flip side, the 103.40-50 area now becomes immediate strong resistance ahead of weekly highs, just ahead of the 104.00 level. A sustained move beyond might trigger a short-covering bounce and push the USD/JPY pair to the 104.70-75 supply zone.

This is followed by the key 105.00 psychological mark, which coincides with the trend-channel resistance and act as a strong barrier for the USD/JPY pair.

USD/JPY daily chart

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Technical levels to watch