Chapter 33 07/18 USDJPY: Recovery Is Expected to Continue Until Wider Selloffs Occur
Abstract: Under the new selling pressure of the USD, the USDJPY met with a new supply again on Tuesday. The USDJPY fell to an intraday low in the past hour, near the range of 138.20-138.10, and is expected to continue to decline and then rebound.
Fundamentals
During Monday's New York session, the USDJPY consolidated above the rising trend in an attempt to extend further from the initial reversal signal. However, profit-taking was triggered during a rapid depletion of momentum, forming a bearish engulfing combination pattern.
After last week's plunge, the USDJPY's recovery is still limited by the initial resistance level of 139.08 (23.6% Fibonacci retracement of 145.06/137.23), keeping the risk of stagnation. Although bulls need to recapture the key threshold of 140.00 to make the recovery situation continue, there is a reversal signal due to insufficient momentum.
Admittedly, the recovery situation requires repeated testing of prices at the bottom to gain energy accumulation. As long as the previous low is not broken again, we are still optimistic about the recovery of the USDJPY.
Technical Analysis
The USDJPY fell sharply last week and hit the 200-day SMA, and the decline slowed down, triggering a bullish reaction; However, the bearish engulfing pattern formed in the 1H timeframe seems to announce that the short-term rebound is only temporary.
Admittedly, a rally will be attempted without the USDJPY breaking below the previous low of 137.24, with an upside target of 141.00. A bearish reaction could then be seen, leading the USDJPY further lower. Investors need to pay attention to the reaction of this level nearby and even their long positions when the USDJPY falls sharply.
Judging from the current downward structure, bears are expected to re-test the starting point of the previous consolidation at 137.67, and then rebound quickly to test the level of the downward pressure line (currently 139.54). After breaking through this level, the second resistance level is 140.92, which is the overlapping resistance level. These resistance levels will become an upward obstacle for bulls, which may prevent them from rising.
If the current downward trend is not effectively improved, it may trigger a further bearish trend. The first support level is at 137.94, which is consistent with the 50% Fibonacci retracement. This support level may have created a potentially important area and rebounded. If the support level is not maintained, the price may further fall to the second support level of 135.11, which coincides with the Fibonacci retracement of 61.80%. These support levels are the key areas where the buying pressure may exceed the selling pressure, leading to a potential reversal of prices.
Overall, although the USDJPY is still under selling pressure, the structural consolidation of the mid-term selling has not been completed, which means that it will not trigger wider selloffs. It is recommended to buy the dips.
Trading Recommendations
Trading direction: Long
Entry price: 137.80
Target price: 141.42
Stop loss: 135.60
Deadline: 2023-08-01 23:55:00
Support: 138.36, 137.92, 137.04, 136.14
Resistance: 139.15, 140.00, 140.22, 140.98
