USD/JPY Technical Analysis: How Strong Are Resistance Levels?

The Japanese Yen, a safe haven asset, has been under selling pressure over the past two trading weeks as forex traders started to rotate out of risk-off assets. In addition, the Bank of Japan has warned market participants that it will not allow the Japanese currency to strengthen out of control and that interventions should be accounted for. The USD/JPY accelerated to the upside after recording an intra-day low of 104.442 and bullish momentum resulted in a breakout above its support zone. Positive developments in the US-China trade war, such as the exemption of certain US goods from tariffs by China and the delay on Chinese tariffs by the US, have further increased the risk-on sentiment. This resulted in more selling pressure in the Japanese Yen and lifted the USD/JPY above its 38.2 as well as 50.0 Fibonacci Retracement Fan Resistance Level.

What is the Fibonacci Retracement Fan?

The Fibonacci Retracement Fan is a different visualization of the Fibonacci retracement sequence which outlines important support and resistance levels in technical analysis. Those levels warrant a closer look and offer entry and exit levels for trades together with other aspects of the analysis.

The Force Index, a next generation technical indicator, started to flash an early warning signal that the uptrend in this currency pair could be nearing its end. As the USD/JPY extended its gains, the Force Index started to retreat from its high. This is marked by the green rectangle in the chart. This coincides with price action approaching the 61.8 Fibonacci Retracement Fan Resistance Level as well as another resistance zone, marked by the red rectangle, which is likely to pressure the USD/JPY. The decrease in the Force Index suggests that bullish momentum won’t be strong enough to pressure for a breakout and continuation of the current rally. The resistance zone to monitor is located between 108.413 and its previous intra-day high of 109.307.

What is the Force Index?

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