This currency pair has been falling down for the last 6 weeks and may reach soon the low levels posted in late 2008 and early 2009, when 1 US Dollar was exchanged against “only” 87.10 Japanese Yen. The current rate is around 89.60. A further decline by 2.80% would drive the pair to the support level of 87.10.
On the weekly chart, the bearish trend triggered in June 2007, more than 2 years ago, remains in place. The long-term descending resistance line (in red) starts from the high point of June 2007 (point A, at 124.16) and goes through the lower highs of August 2008 (point B, around 110.60) and the recent peak of last month (point C, at 97.72). The weekly MACD triggered a bearish signal in early July this year and argues for a continuation of the negative trend.
On the daily chart, the price action of 2009 looks clear. After the plunge between August 2008 and the low of December 2008 (between points B and D, down 21%), the pair bounced back quickly before falling back to 87.10 (points E). Points D and E have created a “double-bottom” chartist pattern that suggests a trend reversal. Until early April, the price action retraced a large part of the previous decline. This rebound ended on the last significant Fibonacci ratio (61.8%), which corresponded to the level around 101.50 (point F).
Point F has been the high of the year so far. A progressive correction has followed, as regular lower highs and lower lows were posted between April to current date.
On the short-term, it is likely that the bear players will push further down the rate towards the previous lows just above 87. As this level has already been a strong support once, it may trigger one more time some buying interest and generate a rebound. Indeed, the pair is already oversold according to the Relative Strength Index (RSI).
On the downside, a break below 87 would accelerate the bearish trend.
