A head-and-shoulders pattern is forming as USD/JPY records lower highs and lows. The RSI is approaching 50, indicating an increase in bearish momentum pressure. A decline beneath 158.48 reveals support levels at 157.88 and 157.35. The USD/JPY pair experienced an increase, approaching the 20-day Simple Moving Average at 159.19 on Thursday. However, it subsequently pulled back due to a strengthening risk appetite, which posed a challenge to the safe-haven attractiveness of the US Dollar. Currently, the pair is trading at 158.99, reflecting an increase of 0.28%.
The USD/JPY chart indicates that the pair is developing a quasi-head-and-shoulders pattern, potentially suggesting additional downside movement. It is important to highlight that the pair recorded a lower high and a lower low following its yearly peak of 161.46, suggesting a short-term trend.-term, sellers are consolidating their position. Furthermore, the Relative Strength Index is trending lower towards its 50-neutral level, suggesting that sellers are currently in control. For a bearish continuation, the USD/JPY must breach the daily low of 158.48 established on April 9. Once surpassed, the likelihood of testing the April 8 swing low of 157.88 rises. Fresh buying pressure is observed below at the 50-day SMA of 157.35, with the 100-day SMA positioned at 156.85.
On the other hand, should USD/JPY surpass the 20-day SMA at 159.19, it could lead to selling pressure near 160.00, a critical threshold for Japanese authorities to heighten their intervention warnings. Consequently, the USD/JPY continues to face limitations on the upside. However, should the market sentiment continue to be positive, potential downside risks may arise, further supported by declining US bond yields.
