Pending the FOMC interest rate announcement, it looks like the USDJPY could reverse its 8-month uptrend that began in March this year. This currency pair has been consolidating between a resistance level 114.18 and a support level at 112.21, having formed its last Higher low at 112.31.
Last week price attempted to take out a 12weeks EMA support at 112.81 but prices ended up closing the week at 113.38.
Traders anticipating a downside breakout move will probably become aggressive on a daily close below 112.31 and a weekly close at 112.21 which will most likely act as a confirmation of the breakout.
It is important to take note that price might trade between the 12weeks and 40weeks EMAs hence lacking direction for a while.
To add more weight to the evidence that a trend reversal has indeed occurred, we expect to see the 12weeks RSI reading below the 50.00 level. At the moment, the RSI indicates that price’s momentum has been declining.
We should also see the 40week +DI(in Blue) cross below the 20.00 midpoint level which will be a sign that the uptrend has lost strength. Our confidence in the trade will be boosted if -DI (In Red) crosses above +DI and further moves above the 20.00 mid-point level. Due to the impending volatile FOMC Interest rate announcement, it will be wise to be patient and get clear signals indicating that the tide has indeed changed.
Analysis done by Denis Mwenga.