The US dollar has been suffering from extreme level of uncertainty from the very beginning of the year due to pending rate hike decision by FED. Prior to the closing of 2016, FED chairperson Janet Yellen stated that they will hike their interest rate for three consecutive times in the year 2017, provided with a stable performance in the U.S economy. The U.S dollar started its medium-term bullish run after hitting the critical support level at 99.05 (low of 26th June 2017).The mighty green bucks rallied significantly higher against the low yielding Japanese Yen and secured a record high at 118.63 after three months bullish rally. However, the bears managed to take control of the market and created an extreme level of selling pressure near the critical resistance level at 118.63.Most of the professional long-term price action trader made a decent profit by executing shorts with bearish Doji formed in the weekly chart.
USD/JPY daily chart technical analysis
Figure: USD/JPY testing the daily critical resistance level at 114.40
From the above figure, you can clearly see that the price has rejected the daily major resistance level at 114.50 and formed a nice bearish doji. The aggressive traders have already gone short in this pair with the formation of bearish pin bar formed at the major resistance level. Since we had an initial false breakout of that critical resistance level some of the conservative traders are expecting another strong retest of this level. If the bulls manage to take break the critical resistance level at 114.50 on daily closing then the ultimate target for this pair would be the high of 3rd January 2017.The daily stochastic is still in the oversold region which clearly indicators that the pair is most likely to move in the upside direction for another retest of that major level. Most of the professional trader in the real trader community is expecting a ranging market until a major breakout occurs.
On the downside, the first crucial support level for this pair is the 100 day SMA at 111.73.This level is going to provide a significant amount of buying the power the dollar bulls as the 200 day SMA lies just below the 100 SMA.A daily closing of the price below the 200 days SMA will confirm the rejection of the major resistance level at 114.50 and the pair will head towards the low of 8th September 2017.
USD/JPY weekly chart analysis
Figure: USD/JPY pair testing the weekly bearish trend line resistance
In the weekly time frame, the overall scenario of the USDJ/PY pair is extremely bearish. Currently, the price is trading near the bearish weekly trend line resistance level at 114.50.Though the dollar bulls tried to break the bearish trend line but eventually formed a bearish pin bar right near the trend line resistance zone. On the contrary, we have a bearish crossover of 100 and 200 weekly SMA which also signifies the bulls are losing control of this market. If the bearish manages to take out the 100 weekly support level at 110.45 on the basis of daily closing the substantial decline is imminent for this pair. The first bearish target for this pair would be critical support level at 105.48.From that level, we might see some ranging movements in this pair but eventually, it will retest the major support level at 99.05.This level is going to provide a significant amount of support to this pair and we might see another corrective movement from that level.
Most of the leading investors are currently waiting for the FED rate hike decision. If the U.S economy manages to exhibit stable performance for the rest of this month then there is a high chance of rate hike in the month of December. However, a sluggish performance in the labor field will decrease the chance of December rate hike program. Considering the overall factors, the overall bias remains bearish for the USD/JPY pair.