Further selling on USD/JPY? Take note of monthly action.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle to 112.22, and is now seen retreating lower.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.

Currently, the pair trades +1.77% on the month.

Daily timeframe:

Partially altered outlook from previous analysis –

The combination of a channel resistance from 108.47 and supply at 112.66/112.08 held price action lower at the tail end of the week. Follow-through selling has been seen this week, stretching to demand at 109.52/109.99 yesterday, typically labelled a ‘rally-base-rally demand’. Although an appealing area in and of itself, channel support (104.44) could make an entry in the event additional selling materialises, shadowed by the 200-day SMA.

The RSI indicator also voyaged into overbought terrain in recent trading, exiting lower earlier in the week and now hovering just above the 50.0 value.

H4 timeframe:

Supply-turned demand at 110.02/110.23, although suffering a mild breach to lows at 109.89, is holding ground. A recently violated trend line support could serve as resistance today, pressuring the candles beyond 110.02/110.23 to demand plotted at 109.30/109.53.

H1 timeframe:

Increased demand for the safe-haven Japanese yen guided USD/JPY lower from the 111 handle Tuesday amid heightened concerns regarding the coronavirus. 110.50 yielded ground, leaving the 110 handle free to the enter the fight.

Direction:

While daily demand at 109.52/109.99 could send price action higher today, the fact we have monthly price fading notable structure is likely to hamper upside from here. The H4 trend line resistance, therefore, stands a fair chance at holding, consequently underlining 110.50 as possible resistance to be aware of today.

Traders threatened by the current daily demand have the option of either passing on the trade, or seeking additional confirmation.