USDJPY bears not in charge yet; need to breach 106.20

USDJPY could not surpass the 50% Fibonacci of the downleg from 112.39 to 104.44 this week and instead corrected lower to meet support in the crossroads of the 107.00 mark and the 50-day simple moving average (SMA).

The momentum indicators are providing discouraging signals for short-term trading, as the RSI has already pierced its 50 neutral mark to the downside – though not significantly – while the MACD is making its way down below its signal line. Therefore, the short-term bias is currently viewed as neutral-to-bearish.

However, for the bears to take full control, the price needs to close decisively below the Ichimoku cloud currently at 106.20, having breached the 106.75 barrier too. If this is the case, the door would re-open for the 105.50-105.00 region.

A rally above the 50% Fibonacci of 108.40 should break the 109.00-109.50 zone and the 200-day SMA to convince traders that the bearish wave from the 112.39 top has come to an end. Moving higher, the bulls could take a rest near the 110.00 mark before testing the area around the 78.6% Fibonacci of 110.70 where the market peaked on May 25.

Meanwhile in the three-month picture, the pair is in a neutral mood, driving sideways within the 109.50-104.44 boundaries. Therefore, any violation at the edges would determine the next direction in the market. Still, the flattening 50-day SMA indicates that an outlook reversal may come with a delay.

In brief, the short-term bias has shifted slightly bearish, but a confirmation is expected below 106.33. In the medium-term, USDJPY is likely to hold neutral unless a breakout occurs at 109.50 or 104.44.