USD/JPY Halts Eight Day Decline As US 10 Year Yield Defends April Low

With that said, it remains to be seen if the decline from the March high (110.97) will turn out to be a correction or a change in trend as a ‘golden cross’ takes shape in 2021, but the recent series of lower highs and lows in the exchange rate warns of a further decline as it trades below the 50-Day SMA (108.19) for the first time since January.




Image of USD/JPY rate daily chart

Source: Trading View

  • USD/JPY approached pre-pandemic levels as a ‘golden cross’ materialized in March, with a bull flag formation unfolding during the same period as the exchange rate traded to a fresh yearly high (110.97).
  • The Relative Strength Index (RSI) showed a similar dynamic as the indicator climbed above 70 for the first time since February 2020, but the pullback from overbought territory has largely negated the upward trend from this year, with USD/JPY trading below the 50-Day SMA (108.19) for the first time since January.
  • The recent series of lower highs and lows raises the scope for a further decline in USD/JPY, but need a close below the Fibonacci overlap around 108.00 (23.6% expansion) to 108.40 (100% expansion) to bring the 107.20 (61.8% expansion) region on the radar.
  • However, the string of failed attempts to close below the Fibonacci overlap may keep USD/JPY within the March range, with a break of bearish price sequence bringing the 109.40 (50% retracement) to 110.00 (78.6% expansion) region back on the radar.
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