Strong surge in USDJPY pair, testing the major resistance level

The USDJPY pair found some fresh buying pressure near the critical support level at 104.63.From that level, the pair started its bullish correcting and rallied more than 200 pips. Prior to the closing of the last trading week, the bulls tried to take control of this market but we had a daily closing of the price below the 61.8% bearish retracement level ( drawn from the high of 21st February 2018 to the low of 23rd March 2018).

USDJPY daily chart analysis

Figure: USDJPY closing below the 61.8% bearish retracement level

From the above figure, you can clearly see that the bulls are getting exhausted and the bears are trying hard to take control of this market. In the starting of the next week, we might see another retest of the 61.8% bearish retracement level. Any bearish price action confirmation signal near the critical resistance level at 106.74 will be an excellent opportunity to short this pair. On the contrary, if the bulls manage to clear out the 61.8% bearish retracement level, the ultimate target for this pair would be the next critical resistance level at 107.83.This level is very crucial since a valid break of this level will confirm the establishment of the temporary bottom of the USDJPY near the major support level at 104.63.However, the U.S dollar bulls have to establish strong bullish power in the global market to start its bullish recovery attempt.

USDJPY weekly chart analysis

Figure: USDJPY testing broken trend line resistance

In the weekly chart, the overall bias of the USDJPY pair is extremely bearish. Currently, the pair is testing the broken trend line resistance at 106.80.This level is very crucial for the investors as a clear break of the price above this level will turn the initial bias from bearish to neutral. The pair needs to clear out the 38.2% bearish retracement level in the weekly chart to establish fresh buying pressure in the global market. However, most of the professional price action traders will be looking to short this pair towards the 38.2% weekly Fibonacci retracement levels.

The aggressive traders can execute short orders near the broken trendline resistance with a tight stop. If the pair manages to clear out the 38.2% Fibonacci retracement level it will ultimately head towards the next major resistance level at 112.43.A daily closing of the price above the major resistance level at 112.43 will result in the retest of 61.8% bearish retracement level on the weekly chart. From that level, we might see some ranging movement and a clear break of that level will confirm the end of the long-term bearish trend in the USDJPY pair.

On the downside, the initial target for this pair is the next critical support level at 101.10.A daily closing of the price below that level will lead this pair towards the low of 12th June 2016.Considering all technical parameters the overall bias for this pair remains bearish.