USDJPY testing ascending channel support, strong challenge for the bulls

There has been a sharp drop in the USDJPY pair after it hit channel resistance level at 114.00.Initially we had a false breakout of the channel top resistance level but eventually, the bears managed to take control of this market. Most of the professional traders went short, after the formation of the daily bearish pin at the channel resistance level. Currently, the price testing a major support level at 106.094 and we have bullish pin right at that level. If the price manages to break above the minor resistance level at 106.757 we will see a strong bullish rally. On the contrary, a break below the current price level will bring a sharp drop in this pair.

USDJPY daily chart analysis

Figure: Testing major support level in the daily chart

From the figure, you can clearly see that bulls are trying to take control of the market from the major support level at 106.094.The first bullish target for this pair is the next critical resistance level at 108.578.From that level, we might see some extensive selling pressure. But a daily closing of the price above that level will ultimately lead this pair towards the next major resistance level at 111.01.From that level, we might see some ranging movement but the bulls are most likely to take this pair towards the high of 7th November 2017.On the downside, a clear break of the low of 16th February 2018 will confirm the end of a medium-term bullish trend.

USDJPY weekly chart analysis

Figure: USDJPY testing weekly channel support level at 106.10

In the weekly chart, you can clearly see the pair is now testing the 61.8 retracement level at 106.10.In this level, we have channel floor which is most likely to provide a significant amount of buying pressure to this pair. If the bulls manage to take control of this market from this level, the next bullish target for this pair is at 110.76.From this level, we might see some bearish retracement in the USDJPY pair. Any bearish price action confirmation signal in the weekly chart will ultimately lead this pair towards the weekly trend line support level at 106.00.On the contrary, a weekly closing of the price above the 50% bullish retracement level will lead this pair towards the channel top resistance level at 112.58.

Fundamentally the U.S dollar is trading mixed against most of its major rivals, on the contrary, the recent tightening policy of BOJ has pushed the low Yielding Japanese Yen significantly higher in the global market. However, considering the last FOMC statement the FED is most likely to hike their interest rate for four consecutive times and this has created an extreme level of bullish sentiment in the global market. Considering the technical and fundamental parameters the overall bias for the USDJPY pair remains slightly bullish at the current level. In the absence of definite bullish reversal signal in the weekly chart, it’s better to stay on the sideline until we get a clear long trade setup.