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  • Bulls failed to capitalize on this week’s recovery from multi-year lows.
  • Technical set-up suggests further downside below 105.80 support area.

The USD/JPY pair extended its steady decline through the early North-American session on Friday and dropped to fresh session lows, around the 106.20-15 region, albeit has still managed to hold above a confluence support.
The mentioned support comprises of 200-hour SMA and 23.6% Fibonacci retracement level of the 104.45-106.68 – this week’s strong up-move of over 200-pips – and should act as a key pivotal point for intraday traders.
Meanwhile, technical indicators on the daily chart are yet to catch up with the recent up-move and have again started gaining negative momentum on the 1-hourly chart, suggesting that the corrective bounce might have already run out of the steam.
A sustained break below the mentioned support will reinforce the weaker outlook and prompt some aggressive technical selling, which might drag the pair back towards testing a support near the 105.85-80 region – 38.2% Fibo. level.
This is followed by support near 50% Fibo. level – around the 105.60-50 region – which if broken might negate prospects for any further recovery and turn the pair vulnerable to head back towards challenging the key 105.00 psychological mark.
On the flip side, immediate resistance is now pegged near mid-106.00s ahead of the 106.70-80 heavy supply zone, above which the pair seems all set to reclaim the 107.00 handle and head towards testing its next resistance near the 107.25-30 region.

USD/JPY 1-hourly chart