- USD / JPY saw a dramatic intraday reversal from the neighborhood of 107.00.
- The pattern supports the outlook for further weakness even below the 105.00 mark.
- A slightly oversold RSI on the 1 hour chart warrants some caution for bearish traders.
USD / JPY extended its intraday rejection slide from the neighborhood of 107.00 and fell to new weekly lows, around mid-105.00s during the mid-European session. The latter marks monthly support from the ascending trendline, which, if broken decisively, will set the stage for further weakness amid the strongly offered tone around the USD.
Meanwhile, technical indicators on the 4hours / day charts have again started to drift into negative territory and support the outlook for a possible breakout of the mentioned support. However, the RSI (14) on the 1 hour chart is already flashing slightly under oversold conditions. This, in turn, warrants some caution for aggressive bearish traders.
Therefore, it will be prudent to wait for strong follow-up selling below the mentioned trendline support before positioning for any further depreciation. The pair could then accelerate the fall to monthly lows, just ahead of the key psychological 105.00 bar, en route to the recent daily close, around the 104.70 region.
On the flip side, any attempt at a rally could now face new supply and remain capped near 106.00. That said, a sustained force beyond it could trigger a short hedging move and help the pair aim again to recover the 107.00 level with intermediate resistance near the 106.35-55 region.