Chart of the day Bullish exhaustion in USDJPY

Short-term technical outlook on USD/JPY

Key technical elements

The recent short-term uptrend from 08 September 2017 low of 107.29 has shown signs of bullish exhaustion. Firstly, it has rallied and came close to the upper limit of a medium-term descending range configuration in place since 10 March 2017 high. In addition, it has formed a bearish daily “Shooting Star” candlestick after post NFP on last Friday, 06 October (see daily).
In the shorter time frame (1 hour), it has traced out a minor bearish “Double Top” configuration in place since 29 September 2016 low and staged a bearish breakdown in yesterday’s (10 Oct) U.S. session. In today (11 Oct) Asian session, it has staged a recovery from yesterday’s low of 111.96 but the rebound stalled right below the pull-back resistance of the aforementioned “Double Top” former neckline support at 112.70 (see hourly chart)
In conjunction with the recent rebound from the 111.96 low, the hourly Stochastic oscillator has flashed a bearish divergence signal at its overbought region. These observations suggest that short-term downside momentum of price action has resurfaced.
The next significant short-term support rest at 111.50 (minor swing low area of 26 September 2017, the lower boundary of the minor descending channel from 06 Oct 2017 high & the potential exit target of the “Double Top” bearish breakdown).

Key levels (1 to 3 days)

Intermediate resistance: 112.47

Pivot (key resistance): 112.70

Support: 111.50

Next resistance: 113.60

Conclusion

Therefore, as long as the 112.70 short-term pivotal resistance is not surpassed, the USD/JPY may see a further potential push down to target the near-term support at 111.50 in the first step within a medium-term range configuration.

On the other hand, a clearance above 112.70 shall invalidate the short-term bearish scenario to open up scope for a further potential up move towards the next resistance at 113.60 (upper limit of the medium-term range configuration from 10 Mar 2017 high).

Charts are from eSignal

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