USD/JPY Shows Strength Within Downward Channel
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The USD-JPY is still trading within a broader falling channel, even though the pair recovered to as high as 91.70 this week after hitting a year-to-date low of 84.80 in early November.
Immediate risk is to the upside, but we retain our medium-term downside bias on the currency pair, with the risk to our analysis being a decisive break and hold above the aforementioned falling channel currently located at 93.46.
On the downside, with the Dec. 4 high at 90.77 violated, we expect that level to reverse roles and provide support if tested, thereby turning the pair higher again.
However, if a trade below that level occurs, we should witness further downside pressure toward the 88.30 level, the Dec. 14 low, with a breach there setting the stage for further weakness toward the 87.35/87.10 levels.
The weekly studies are bullish and pointing higher, suggesting further strength. On the whole, though immediate risk remains to the upside, the overall medium-term trend remains to the downside.
