USD/JPY Forecast: Corrective Rally To 111.70-112.00 Likely

The technical studies indicate increased odds of a corrective rally to 112.00 levels in the next 24-36 hours.

As of writing, the currency pair is trading at 111.15 levels. The spot found bids below 111.00 in Asia, but failed to cut through the 1-hour 50-MA hurdle as the uptick lacked the support of the Treasury yields.

4-hour chart

Source: Netdania

The above chart shows-

Bullish-price RSI divergence - shows the pair may have found a temporary bottom at 110.84 and could test the downward sloping 50-MA.
The falling channel is still intact - Channel resistance is seen 111.50 and support is seen at 110.45-35 levels.
The moving averages - 50-MA, 100-MA and 200-MA are still sloping downwards, suggesting the corrective rally is likely to be short-lived.

1-hour chart

Source: Netdania

The above chart shows-

Corrective move could gather pace as the 50-MA and 100-MA have bottomed out and could soon converge in a USD positive manner.

View

The technicals are aligned in favor of a corrective rally to 112.00 levels. Also, as per Reuters report, sub-111.00 is under surveillance by Japanese importers and investors. So, it would take another wave of curve flatteners (sharp drop in the 10-year treasury yield) to push the pair down to 110.00 levels. As of now, it appears that the road to 110.00 would include a minor rally to 112.00 levels.