April 25, 2024

USD/JPY: Profit-Booking Has Dragged Close to 123.00 Area on the Back of Oscillators that are Completely Overbought

New Rally, But Pullback Imminent

The USD/JPY currency pair was able to ease its average gain following its eventual touch of a six-year high point at 125.10. The trading asset was equally able to record a new huge rally of nearly 7.8% over the course of the past four weeks. It is highly possible that the currency pair will see a period of pullback as the days go by since oscillators have now been overbought on a high scale.

The Asian major showed a negative and open rejection that reversed its move for the most part of Tuesday as the pair pushed a bit higher when it began to open gradually. But then, it still faced some significant offers following investors’ preference for an approach of selling on the rise of the pair.

USD/JPY price chart. Source TradingView

With regards to what goes on around the weekly scale, the USD/JPY currency pair has seen a stronger form of rallying following a breakout of the increasing channel on the topmost phase whose higher end was placed there from the 2nd of April, 2021 high points at 110.97. Whereas, the lower side of it was marked from the 8th of January, 2021 low points at 102.59.

It should be noted that the horizontal lines that were positioned from the 16th of December, 2016 high points at 118.66 are expected to act firmly as its major line of support.

The 10-period and 20-period exponential moving averages are currently scaling rapidly to higher rates at 118.24 and 116.25 in that order. These developments contribute significantly to the upward filters. In the same manner, the relative strength index equally managed to print a new high point in the vicinity of 82.00 which goes to show that there has been a situation of overbuying and it has set the stage for a pullback in the near future.

The Pair Might Pick Up Bids

If the major pair goes ahead to run a test of its ground on the five-year resistance zone at 118.66, it is expected that there would be a build-up of new bids that would come together to boost the pair swiftly in the direction of the psychological resistance which stands at 120.00, and it is followed closely by a 5th of February, 2016 high standing at 121.49.

On the other hand, bearish traders are set to be in control just in case the pair slides under the 10-period exponential moving average which is at 118.24. It will consequently pull the pair in the direction of the 20-period exponential moving average at 116.25. A breach in the 20-period EMA will have the pair in the direction of the 3rd of March, 2017 high point at 115.50.   

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