Current Market Condition: The JPY/USD pair is currently exhibiting a bearish momentum, as it is positioned below both the 50-day and 200-day moving averages. This indicates a strong downtrend in the market.
Scenario 1 – Bearish Momentum: In this scenario, the price is expected to continue its downward movement. The first potential level to test is 137.728, and a successful break below this level could lead to further downside tests at the 61.8% Fibonacci retracement level, which coincides at 136.704. The importance of this Fibonacci level lies in its significance as a potential support area.
If the bearish momentum persists, the market may target lower levels, with notable areas of interest at 136.403 to 135.901. Among these, the 134.814 level stands out as a critical support zone, likely to attract increased buying interest.
Should the selling pressure intensify, the price might decline further towards the 133.866 and 133.600 levels. However, the most crucial support zone to monitor lies between 133 and 132.569, as a breach below this region could signal a potential shift in the long-term trend.
Scenario 2 – Bullish Momentum: In contrast to the bearish scenario, a bullish momentum could come into play. If the price manages to reverse its current downtrend and climbs higher, it may retest the 139.931 level. A successful retest above this level would suggest the potential for further upward momentum.
Subsequent resistance levels to watch in this bullish scenario are located at 140.359 to 140.838. Should the price surpass these levels, it may continue to climb higher, testing the 141.750 and 141.959 areas.
A major resistance level worth mentioning is situated at the 38.2% Fibonacci retracement level, positioned at 142.849. This level could act as a strong barrier, and traders should closely observe any price action around it for potential reversal signals.
Relative Strength Index (RSI) and Range Considerations: The RSI is currently within an oversold range, indicating that the market may be due for a potential bounce or consolidation. However, it is essential to note that despite the oversold condition, the overall momentum remains bearish, which means that any upward price movement might be temporary in nature.