Looking at the daily chart above, the pair moved sharply lower on the back of the BOJ shift in their 10 year target yield from 0.25% to 0.5%.That shift sent the USDJPY moving sharply to the downside and in the process away from its 200 day moving average at 135.724. The price also moved below the December 2 low at 133.61 and the 50% midpoint of the 2022 trading range 132.70. The price correction off of the initial low did reach back above the 50% retracement up to 132.89, but the move back to the downside has continued in the early New York session tilting the bias more to the downside once again (below the 50% midpoint level).
What next?
Going back in time, the area between 131.24 and 132.02 was home to swing highs and swing lows going back to April, May and June(see red numbered circles on the chart above). In early August of this year, the price fell below that old area, but found support buyers against its 100 day moving average (blue line in the chart). Support buyers leaned against that MA line and bounced the price higher. Buyers remained in control.
Later in August a correction lower, reestablished support in the old swing area (between 131.246 and 132.02). That was the go-ahead vlue to restart the bullish trend to the upside that ultimately stalled at the multi-decade high at 151.938 in the month of October.
Now with the price back to that old swing area, it should give traders some cause for pause (i.e., support). The dip buyers looking for a bounce could use the 131.246 level as a risk defining level with limited exposure. In other words, we should expect some sort of battle between the buyers and sellers within the area (with stops and more selling on a break below).
However, be aware that the technical breaks today, did damage and put the sellers firmly more in control.
Specifically,
Breaking away from the 200 day moving average (green line) at 135.724 is more bearish long term.
Falling below the old December low at 133.619 is more bearish long term.
Falling below the 50% of the 2022 trading range at 132.70 is more bearish long term
All those levels should provide technical selling ceilings. For example if the 50% retracement at 132.70 is tested and cannot move back above, the sellers are firmly in control.
Ultimately it would take a move back above the 200 day moving average to hurt the bearish bias from a longer-term perspective.
So sellers are in control, but a key support area is being tested on the daily chart. Get below 131.25 area, however, and another door will open up from a technical perspective.
