The short term outlook for USDJPY turned bullish after prices broke above the key 108 level this week. The pair has retraced more than half of the April to May decline after rebounding from the low of 105.54 and rising steadily to a 2-week high of 109.36 today before turning back down. There appears to be strong resistance around the 61.8% Fibonacci level at 109.38 (retracement of the downleg from 111.87 to 105.54). Immediate support is now being provided by the 50% Fibonacci around 108.64.
As long as the market remains above the key 108 level, there is scope for more recovery and a chance for the USDJPY to have bottomed at 105.54. Prices would need to clear the 109.36 high to open the way to the 110 area. A break below 108 would propel a decline to retest the 105.54 low. Below this would see a resumption of the underlying bearish trend that started at the end of 2015.
Origin: XM
