The dollar continues to look bearish against the yen today after breaking below Wednesday’s low early in the session to enter into a technical downtrend on the daily chart (lower highs and lower lows).The pair already appeared to have entered into a bearish period after rebounding off the 61.8 fib level last week, which coincided with the ascending trend line from 16 January lows and a previous region of support and resistance.
Today’s candle is looking particularly bearish and if we see if close near the daily lows, it would suggest further downside is to come. Although it should be noted that marabuzo candles can often be followed by a correction, a rally in this case. The test of this would be around the half way mark of the daily range, a failure at which would indicate a retracement.
The next significant area of support in the pair could be between 118.30 and 118.50 which has been a key zone of support in the past. In particular, you can see this was the case between 9 February and the start of May.
It also coincides roughly with the 55-week simple moving average, which has been an important support for the pair throughout the uptrend over the last few years.Key resistance to the upside comes around 120.70 as a move above this breaks the technical downtrend. This would bring 121.75 into play – last week’s high – a break of which would suggest the uptrend has resumed.
It should be noted that today’s US jobs report may have a significant impact on the US dollar which could bring about a lot of volatility in the pair.
About Craig Erlam
Based in London, England, Craig Erlam joined OANDAin 2015 as a Market Analyst. With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic research. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.