The 50 SMA is Holding on USD/JPY for Now
[[USD/JPY]] has been pretty bullish in the last three months, as the sentiment improved across the markets, which turned safe havens such as the JPY bearish. The USD also turned bearish, especially in October, due to slowing manufacturing activity in the US; but the effect on safe havens was bigger, hence the uptrend during this period.
But, this week we are seeing a bearish reversal. USD/JPY offered a couple of signs of this reversal in the last two days of last week, when it formed two doji candlesticks on the daily chart, which are reversing signals after the bullish trend. The last bullish leg of last week was also complete, so it was time for a retrace down.
The retrace came after the US ISM manufacturing report on Monday came out pretty soft again, showing that this sector is suffering in the US, as well as int he rest of the globe. The increased tensions between US and China also helped turn this pair down, as they hurt the sentiment in financial markets and safe havens are attracting some decent bids this week.
So, USD/JPY retraced lower this week. But it seems like the retrace might be over now, from a technical perspective. The 50 SMA (yellow) which has been providing support several times, is holding as support again. I highlighted this moving average yesterday and it seems like it’s doing its job.
The daily candlestick looks like an evening star now, which is a reversing signal. But, fundamentals have a big say in this pair and if the rhetoric remains heated between US and China, then the 50 SMA will likely be broken. Otherwise, we might see a bounce from here, which would be a good opportunity to open a buy signal.
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