USD/JPY (daily chart as of September 19, 2013) dropped to a low of 97.75 yesterday after the Fed’s no tapering decision, and found support right at the medium term uptrend line (bold green line on the chart). Price then bounced off the trend line today with a strong bullish candlestick and appears to engulf the entire body of yesterday’s candlestick. It could be an early sign of potential strength for the currency pair, which needs to be confirmed by today’s closing price and follow-through price action.
As we have mentioned in our previous analysis, USD/JPY’s recent price behavior has been showing indecision. This time, once again, we see the hesitation of directional movement. Note that the low of 97.75 is also located at the medium term downtrend line (bold red line on the chart), i.e., 97.75 is an intersection point of the two trend lines (red arrow on the chart). Yesterday’s drop could be considered a test of the two lines. Watch closely today’s closing price and the resistance/support significance of the trend lines.
If price closes strongly today with a long bullish candlestick that engulfs the entire body of yesterday’s candlestick, it is quite possible that the support line would be in effect, at least for the short term. If price closes weakly today, it could turn down and test the uptrend line again. The MACD is about to make a bullish crossover from above the zero line, and the RSI is rising to test 50.
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