The USDJPY took another plunge to the downside. This one took the price from 144.3092 a low of 141.622 (see price action on the five-minute chart below). That move took the price below its 200-day moving average 142.282. However, the price has quickly snapped back higher.
Looking at the 5-minute chart below, the rotation back higher has taken the price above the 38.2 – 50% correction zone of the last trend leg to the downside (from 144.309). That may give the buyers some hope. The failure of the break below the 200-day moving average is also a positive for a potential rebound. At the very least, traders may look to use that 200-day moving average at 142.28 as a profit-taking/risk defining level now that it has failed. At least the buyers have something to lean against.
Taking a broader look at the daily chart below, the fall below the 200-day moving average (green line in the chart below) at 142.28 was the first break below that moving average since May 17.
In addition, I have also extended the Fibonacci retracement to the low from January. That level comes at 142.47. The price fell below that retracement level and in the rebound has moved back above it. Failed break.
Both the 200-day moving average and 38.2% retracement may now be a support/risk defining level. With the break failures, it is likely that the market price action will settle into a consolidation phase for the time being. Watch 143.79 as a topside target. If the price is able to get above that level, there could be even more short covering.
This article was written by Greg Michalowski at www.forexlive.com. Source