USD/JPY: Are the bulls running out of strength?
It was not comfortable for the US dollar against the Japanese yen to defend itself against the death cross at the beginning of the year. At the start of February, the market overcame the important 109.60 area and then slipped away for a few days below its 50-day smooth. Despite the high-risk appetite of the bulls, the market pushed off the SMA 50 with a momentum candle to test the psychologically important 111.00 area.
What followed was a classic bearish engulfing, when the candle spans the entire trading range of the previous candle. This is generally considered a bearish sign but, on Monday, the market was unimpressed.
The MACD is still in positive territory. The distance between the MACD and its trigger line is nominal. However, the USDJPY has several hurdles ahead of it for further positive movement. For example, the 110.75 to 111.00 range could serve as the first significant resistance for the next few days. If the market can overcome this, the 200-day line awaits in the 111.50 range.
If these barriers are broken on the way up, the next resistance is likely in the range of 112.00 to 112.20.
It remains to be seen how short-term gains will continue to develop and whether there may be a delayed reaction to the engulfing candle if the market fails to jump over the significant blockade in the area of the smooth 111.00.
Should the bears take over the market again, the 50-day smoothing will provide support in the area of 109.60. If the market moves further down there could be support in the known regions of 108.47 and 107.05.
USD/JPY Daily Chart | Source: ActivTrader
Written by Daniel Schuetz, External Analyst
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