USD/JPY Rebounds - Monitor Reaction at Resistance Then Price Bottom
Recently, we saw the USD/JPY break a key support and open up a bearish outlook. In the latest update, we suggested monitoring the 108 area for support. This week, we saw USD/JPY stall just above 108 and complete a price bottom. Now, we should observe price action to either confirm this price bottom, or to look for further downside.
USD/JPY 4H Chart
(click to enlarge)
a Bullish Scenario:
- The 4H chart above shows a bullish scenario.
- Let's first anticipate resistance around 110.00, around a previous support pivot, and near the 100-period simple moving average (SMA) in the 4H chart.
- Price will also be testing a falling trendline.
- Now, let's see if the subsequent downswing will hold above 108.65. If it does, we should anticipate an eventual break above the 110 pivot, which would open up a bullish scenario to 112, and maybe the next key support/resistance pivot around 115.
- If price surges above 110.00, we should probably anticipate upside towards 112 and possibly 115. In this scenario where the market is already looks bullish, we should note expect price to retrace all the way back to 108.65, but rather anticipate support at or above 109.
- A break below 108.60 on the other hand suggests further downside to test the 108 handle with likelihood of breaking lower.