Have USD/JPY bulls lost the game?

USDJPY set a strong foothold near its 50-day simple moving average at 157.90 after last week’s brutal exit out of the 161.00 territory. Note that the pair made a double top pattern near its 38-year high of 161.94 before descending, which typically indicates a bearish continuation.

Despite the recent crash in the price, the series of higher lows is still consistent in the medium-term picture and only a decisive close below the 155.00 mark would shift the outlook to bearish and squeeze the price to 153.65. In the meantime, the 156.53 region, where a former descending trendline is located, could delay any continuation lower.

Technically, the RSI and the MACD are not in favor of the bulls. The former hit a new low below its 50 neutral mark despite showing some recovery today, while the latter continues to lose momentum below its red signal line. Likewise, the stochastic oscillator remains negatively charged, though it’s a short distance from its 20 oversold level, suggesting that selling forces might soon lose steam.

In the bullish scenario, if the pair closes above 158.77, buying appetite could grow towards the 20-day SMA, which is currently flattening around April’s peak of 160.20.  Then, the pair should pierce through the 160.85-161.94 constraining zone to reach the 164.43-165.35 caution region.

In summary, USDJPY could continue to face bearish pressure after its significant drop, but there is potential for bullish activity if the price remains above 155.00.