USD/JPY Price Forecast: Long-term trend could be reversing but bearish momentum lacking
- USD/JPY has broken to new lows, indicating a possible reversal in the long-term trend.
- The move lacks momentum, however, and risks running out of energy before a pull back higher.
USD/JPY has made a bearish break below the key August 5 lows. Although the move down lacks momentum the break could be indicative of a long-term trend reversal.
USD/JPY Daily Chart
The pair has already broken below a major multi-year trendline, suggesting the long-term uptrend has been undermined. The break below the August 5 lows confirms it might have reversed. Given it is a principle of technical analysis theory that “the trend is your friend” such a break increases the odds of more downside evolving in the future.
Strong support comes in at 140.25 (December 2023 low), however, and this could slow the pair’s descent. A break below that level too, would provide even more confirmatory evidence of a reversal in the trend. Such a break might see price fall to the next target at 137.24 (July 2023 low).
USD/JPY is showing bullish convergence between the price and the Relative Strength Index (RSI). At the August 5 bottom, the RSI was in the oversold zone, now even though price has sunk to a lower low, RSI has not.
This could be a sign that the move down lacks bearish conviction and suggests a risk of a rebound higher.
Author
Joaquin Monfort
FXStreet
Joaquin Monfort is a financial writer and analyst with over 10 years experience writing about financial markets and alt data. He holds a degree in Anthropology from London University and a Diploma in Technical analysis.
