As USDJPY enters the new week, the battle between bulls and bears continues to unfold. The 20-period SMA is proving to be a tough barrier to overcome, despite some signs of positive momentum in the near term. Both the stochastics and RSI are showing signs of a reversal higher, but the strength of this momentum remains questionable. The price has just managed to edge above the 20-period SMA, only to be met with resistance from the Tenkan-sen line of the Ichimoku cloud.
Key Resistance Levels
The Kijun-sen line is also looming above the price, presenting a challenge just above the 154.00 level. To solidify any potential rebound from recent lows, USDJPY must successfully navigate past these obstacles, including the 155.00 region, and set its sights on the 50-period SMA at 155.40. Only then can there be a hope of re-entering the Ichimoku cloud and establishing a more bullish outlook for the pair.
Downside Risks
However, if the upside momentum falters and the price slips back below the 20-period SMA, a retest of the July 25 low of 151.93 could be on the horizon. A breach of this support level would further strengthen the bearish short-term outlook. To cement a bearish medium-term perspective, USDJPY would need to breach its 200-day SMA, not far below at 151.62. In essence, while there is potential for the current rebound to gain traction, there are significant hurdles and risks that could derail the bullish momentum.
The battle for USDJPY supremacy is far from over. Bulls are facing an uphill struggle to regain control, as key resistance levels and downside risks loom large. The near-term positive momentum, while present, is fragile and must be sustained in order to pave the way for a more sustained rally. Traders and investors alike will be closely monitoring the price action and key technical levels in the days ahead, as the fate of USDJPY hangs in the balance.