USD/JPY tumbled on Wednesday, falling below 109.60, the lower end of the sideways range that was containing most of the price action since Aug.18. The tumble continued even lower, breaking below the low of Aug. 24, at 109.40. In our view, the downside exit out of the range has turned the short-term picture negative.
If the bears are willing to stay in the driver’s seat, we could see them challenging the 109.11 zone soon, marked by the lows of Aug. 16 and 17. They may decide to take a break after hitting that territory, thereby allowing a corrective bounce. However, as long as that rebound stays below the lower end of the aforementioned range, we will continue aiming lower. A forthcoming slide could take the action below 109.11, a move that may pave the way towards the low of Aug. 4, at 108.72.
Taking a look at our short-term oscillators, we see that the RSI moved lower and got closer to its 30 line, while the MACD lies below both its zero and trigger lines, pointing down as well. Both indicators detect strong downside speed and enhance the case for further declines in this exchange rate.
On the upside, we would like to see USD/JPY climbing all the way up to, and breaking, the 110.25 hurdle, which is the upper boundary of the pre-discussed range. This could be a signal that the bulls have gained full control and may initially target the peak of Sept. 8, at 110.45. If that zone is also broken, then we could see larger upside extensions, perhaps towards the high of Aug. 11.