The USDJPY fell below its 200 hour moving average yesterday for the first time since April 1. That break yesterday occurred near 127.50. In the short term that increased the bearish bias and indeed the price did move below the 50% midpoint as well at 127.238 before rebounding back to the upside only to find sellers against that 200 hour moving average in the New York afternoon session yesterday.
The price moved lower into the close and continued to a new corrective low at 126.93 in the early Asian session today. However since then, the price has been stepping back to the upside.
In the early European session, the USDJPY price move back above its 200 hour moving average (green line) moving up to test the 100 hour moving average (blue line) currently at 128.052. The last seven hours have seen the price stay above the lower 200 hour moving average at 127.81 currently, but have some pause near the 100 hour moving average. Buyers and sellers are battling it out around that moving average it seems..
Is the correction officially over?
Clearly the sellers inability to stay below the 50% midpoint in the early Asian session (and extend down to the next target at the 61.8% retracement area at 126.727), scared sellers into buying. The subsequent moves back above the 200 hour moving average are another red flag. If the 200 hour moving average level continues to hold, and the price is able to get above the 100 hour moving average with momentum, we will see more upside buying as shorts give up in the short term.
Remember ....after the sharp trend move higher in the USDJPY (and any currency pair for that matter), it is paramount for the sellers to take back control from the buyers. They do that by breaking and staying below technical targets. They also need to reach the next technical targets to give the sellers more comfort (and scare the buyers).
Clearly from the hourly chart, the sellers tried to keep below the 200 hour moving average, and tried to extend below the 50% retracement as well. However, both those attempts ran out of steam and could not extend to the next target near 126.727 (61.8% retracement and swing area – see red numbered circles). The buyers returned. The selling dried up.
US yields are modestly higher (but off high levels) which is helping a little. Fundamentally, the Federal Reserve is on a tightening path, while the Bank of Japan and Japan political officials may jawbone the currency in an attempt to move the JPY higher, but they don't seem to be interested in raising rates.
Watch the levels for technical clues. For now stay above the 200 hour moving average gives the buyers the upper hand, while making the sellers a bit more nervous.