USD/JPY Consolidating Below Short-Term Downtrend Line

USD/JPY (daily chart as of January 23, 2014) retreated once again to test the daily EMA 50 after today’s weak US data release. US Initial Jobless Claims came in line with expectations and added 1000 more claims than the previous release, which raised anticipation for further postponing of FED tapering. The pair’s most recent retreat occurred after a sharp drop on November Non-Farm Payrolls, released on January 10.

Price bounced off the daily EMA 50 on January 14 with a very strong bullish candlestick indicating strong support at the daily EMA 50, but it stalled below the short-term downtrend line connecting the January 2 high and the January 10 high. It appears that the pair is consolidating after the prior uptrend move that started from early November 2013.

As of this writing, current price is trading within a small range between the daily EMA 50 and the short-term downtrend line. If it can hold the daily EMA 50, another leg up may be expected to test the short-term downtrend line. If price breaks down below the daily EMA 50 with confirmation, the pair could face further downward movement.

Support levels below:
1st support: daily EMA 50
2nd support: 102.85 (January 13 low)
3rd support: 102.00 or daily EMA 100

Resistance levels above:
1st resistance: 104.80 or the short-term downtrend line
2nd resistance: 105.40 (January 2 high)
3rd resistance: monthly EMA 200