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Abstract: The medium-term uptrend of USDJPY since January 16, 2023, is at risk of collapse. The sharp downward trend since July 6, 2023, has reached oversold status. At the moment, a small rebound above the psychological mark of 140.00 cannot be ruled out.

Fundamentals

The yen rebounded across the board on worries that the Bank of Japan could intervene if the market was overbought. USDJPY has broken below three important psychological thresholds of 143.50, 142.50, and 141.80 in the past few trading days. In addition, the JPY is sending a pessimistic signal at the intersection of MA30, and the resistance level converted from the support level following the bullish breakout in late June. As the psychological level of 140.00 is approaching, coupled with the second bottom test of the RSI in the oversold zone, USDJPY may retrace towards 142.50 (the midway of the AB =CD descending pattern).

Technical Analysis

USDJPY has fallen sharply for the fourth day in a row, with a new acceleration in Asian session trading on Tuesday, weighing on the support of the psychological mark at 140.00. The mark is also the 76.4% Fibonacci retracement to the upside of 138.43-145.06.

Currently, the probability of the bears testing the zone below 140.00, intentionally and tentatively, is high. However, the deeply oversold RSI is warning the bears that further lower resistance will strengthen and the continued break below is unlikely.

Therefore, the ensuing consolidation or corrective upside may precede a new decline. The initial resistance to the upside is located at 142.50, which is in the middle of the AB=CD descending pattern. After that, further gains will be limited by this level, allowing the bears to continue to function.  

However, a firm break of the 138.80 level by the bears will signal an extension of the collapse decline, invalidating the bulls' reversal in the short term. Therefore, investors are advised to mainly go long at lows.  

Trading Recommendations

Trading Direction: Long

Entry Price: 140.00

Target Price: 142.50

Stop Loss: 138.40

Valid until: 2023-07-25 23:55:00

Support: 140.18/139.30/139.00

Resistance: 140.94/141.25/142.39