By Mohammed Isah of fxtechstrategy.com
: The pair has established a firm hold below the 1.4625 level, its Nov. 3 low, so further downside risk points toward the 1.4500 psychological level.
A breach of that level will open the door for more downside pressure toward the pair's Oct. 2 low at 1.4479 or even lower.
The current price action has halted the pair's medium-term pattern of higher highs and lows and increased the risk of a deeper price retracement. The weekly relative strength index is bearish and trending lower, supporting this view.
On the other hand, a failure below the 1.4625 level will turn the focus to the upside and toward the 1.4799 level, the pair's Nov. 20 high.
We would expect a reversal of roles there to turn the pair back down again. However, if that level fails, we could see the pair climb toward the 1.4949 level, the back of the invalidated long-term rising trend line.
Beyond there, the pair could make a run at the 1.5143 level, its year-to-date high.
: The immediate risk continues to point higher.
That said, we'll retain our medium-term bearishness as long as the pair trades within its established declining channel.
In the near term, the dollar/yen may move higher and retarget its Dec. 4 high at 90.77.
This comes on the back of its Tuesday strength followed with a bid tone in early trading Wednesday.
If the pair trades above the 90.77 level, it will resume its rally initiated from the 84.80 level and create further upside scope toward its Nov. 4 high at 91.31.
A cut through there would allow additional strength toward the 92.31 level, the Oct. 27 high.
The daily relative strength index has turned higher, supporting this view.
The downside target is located at the 88.30 level, the pair's Dec. 14 low, followed by 87.37 and 87.10. its Dec. 9 and Jan. 18 lows, respectively. A penetration of those levels would allow the pair to target its Nov. 30 low at 85.85 and then its year-to-date low at 84.80.
Mohammed Isah is a technical strategist and head of research at FXTechstrategy.com, a technical-research Web site. He has been trading and analyzing the foreign exchange market for the past seven years. He formerly traded stocks before crossing over to the forex market, where he worked for FXInstructor LLC as a technical analyst and head of research before joining FXTechstrategy.com. He has written extensively on the forex market and technical analysis and his articles have been featured in The Technical Analyst Magazine, The Forex Journal Magazine, The International Business Times and FXstreet.com. At FXTechstrategy.com, he writes daily, weekly and long-term technical commentaries on currencies and commodities, which are offered to its clients. He also produces
for his subscribers. He provides full coverage of the forex market with specific focus on G10 currencies as well as the commodities markets, with focus on five key commodities.