USDJPY Looks Set For One More Leg Lower

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The Japanese yen was seen gaining ground against most of its counterparts, including the US dollar yesterday. The rise in the Japanese yen was mainly due to ongoing tensions in Ukraine and Gaza.

This is leading to a drop in the USDJPY pair. Recently, the pair moved lower towards the 101.10/00 support levels, which protected the downside in the pair. However, the market sentiment remains in favour of more gains in the Japanese yen, but we need to also consider the fact that the USDJPY is reaching important support levels.

Please check the chart attached for the post image

There is a trend line formed on the 4 hour chart for the pair, which is acting as a barrier for the US dollar sellers. The recent fall also found support around the same trend line at 101.06 level. The pair is now again showing signs of weakness and might fall one more time after completing the current correction. One key point to note here is that the trend line is now coinciding with the 1.236 extension of the last leg higher from the 101.06 low to 101.80 high. So, the 100.90-80 support area holds a lot of importance in the short term for the pair, which might cause a serious rise in the pair.

It is also possible that the pair might not fall from the current levels and continue trading higher. In that situation, an immediate resistance can be seen around the 100 moving average on the 4 hour chart, which is currently at 101.62. A break above the same might call for a test of the previous high of 101.80.

The RSI on the 4 hour chart bouncing from the extreme levels, but could face hurdle around the 50 level. So, as long as the pair is below the 101.80 level a down-move towards the 100.90 level cannot be denied.

Posted By Simon Ji of IKOFX 

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