USD/JPY shows signs of weakness as it breaks below a key rising channel, with the uptrend now in question. Key resistance at 144.68 remains pivotal for further gains.
USD/JPY Breaks Below Rising Channel
The USD/JPY pair has been on an upward trajectory since its reversal at the December 2023 low on September 16. The pair has formed a series of higher highs and higher lows, aligning with the principles of technical analysis that suggest "the trend is your friend." This pattern implied that the odds were in favor of the continuation of the short-term uptrend.
However, on Tuesday, the USD/JPY price broke out of the rising channel, signaling a potential weakness in the bullish momentum. While this development points to a possible shift in trend, it does not necessarily confirm a full-scale reversal to the downside.
Key Levels for USD/JPY to Watch
Despite breaking below the channel, the short-term bias for USD/JPY remains mildly bullish. For further confirmation of upward movement, the pair would need to close above 144.68, which was the September 24 high. If this occurs, tentative targets lie at 145.00, 145.50, and in a more bullish scenario, 146.00. These levels will be crucial to monitor as traders assess the next move in USD/JPY.
One important technical indicator that suggests a potential downside is the Relative Strength Index (RSI). The RSI has shown a bearish divergence about the price, marked by a red dashed line on the chart. Even though USD/JPY did not drop lower on September 24 compared to its low on September 20, the RSI registered a lower value, indicating that the recent sell-off has created strong downside momentum. This divergence hints at underlying weakness in the pair, which could result in further downward pressure.
USD/JPY Medium and Long-Term Trends in Focus
While USD/JPY is currently in a short-term uptrend, it's important to consider the bigger picture. The pair remains in a medium-term downtrend, raising the risk of a continuation lower. However, this risk is counterbalanced by the long-term uptrend, which provides a bullish backdrop. Traders will need to keep an eye on both the short-term and long-term factors when making their decisions on USD/JPY's next move.
In conclusion, USD/JPY is at a critical juncture. The break below the rising channel suggests a weakening uptrend, yet key levels, including 144.68, could offer further bullish opportunities. At the same time, bearish signals such as the RSI divergence suggest caution. The interplay between short-term momentum and long-term trends will be decisive in determining the pair's direction in the coming days.