USD/JPY continues to balance above its medium-term upside support line, taken from the low of the 25th of March. The pair also broke the short-term downside resistance line drawn from the peak of the 4th of October, which also adds a positive spin on the pair’s near-term outlook. In a way, as long as the medium-term upside line remains intact, we could aim for higher levels that were tested in the beginning of October.
For us to get more comfortable with the upside scenario, we would need to see a break above the 112.55 level, marked by the high of the 11th of October and the low of the 27th of September. This way we could start aiming for a possible test of the 112.85 area, which acted as good support on the 8th and the 9th of October. If the area is not able to withhold the bulls from pushing USD/JPY higher, then the next stop for it could near the 113.50 hurdle, marked by the low of the 3rd of October.
Looking at our oscillators on the 4-hour chart, the RSI and the MACD, both seem to have bottomed and shifted back up. The RSI is currently balancing around its 50 line. The MACD continues to run above the trigger line. The indicator also is pointing to upside and is aiming towards the zero line. All this adds a bit more confidence over the upside scenario mentioned above.
On the other hand, a strong push back down, which could lead to a break of the aforementioned medium-term upside support line and eventually a close below the 111.65 level, marked by the low of the 15th of October, could invite more bears to the table and turn everything around. This could pull USD/JPY towards the next potential area of support at 111.10, which was the low of the 12th of September. If that zone is not able to withhold the bear-pressure, a further decline to the 110.85 hurdle could be possible. This is where the pair found support on the 10th of September.
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