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USD/JPY Bounced off the 108.05 Resistance

May 29, 2020 at 5:34 by Dorin Rosu

The US dollar versus the Japanese yen currency pair seems to have hit the wall at the 108.05 intermediary level. Does the next support, the psychological 107.00, serve as a solid ground for the bulls to resume a rise?

Long-term perspective

The depreciation that started from the 111.71 high found support at the 107.00, a key, and also a psychological support level. But the end of April brought about the puncture of this level, an event followed by the confirmation of it as resistance. However, the surprise was that the 106.12 intermediary level halted the decline and sent the price beyond 107.00 once again.

Since the middle of May was the time when the firm 107.00 level got reconfirmed as support, the expectations were for the bulls to continue their rally based on their accomplishment of founding a good starting ground. And so they did, but the only catch was that — even with all the odds in their favor — the 108.05 level was a strong barrier. So strong, in fact, that it carried the price back to the close vicinity of 107.00.

Considering that the bulls failed in their mission to force the prices higher, after an important level — 107.00 — was falsely pierced and departed from following its confirmation, points to the reality that the bears might very well have their agenda already established. Subsequently, as 107.00 gives way, the next bearish objective is represented by 106.12, the piercing of which and succeeding confirmation as resistance opens the door to the 105.09 support level.

However, if the bulls manage to pull off a recovery, like the confirmation as support of 107.00 (with or without its false piercing), then the market could turn to range trading, with the upper boundary marked by 108.05.

Short-term perspective

The appreciation that started after the 105.02 level got confirmed as support ended at 108.02 after only the peak of 108.08 was able to pass the level. However, that passage was brief, and the remainder of the oscillations pierced the support trendline and, later on, the 107.34 intermediary level.

Only a quick recovery above 107.34 can give the bulls a chance to regain control. If this happens, 108.02 is the first objective.

On the other hand, if 107.34 gets validated as resistance or if the market doesn’t even print a throwback towards the level, then the bears may very well head for 106.77 and then for 106.02.

Levels to keep an eye on:

D1: 107.00 106.12 105.09 108.05
H4: 107.34 108.02 106.77 106.02

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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