- USD/JPY struggled to capitalize on its early uptick and retreated from the monthly top.
- The ascending trend channel supports prospects for the emergence of some dip-buying.
- A sustained break below the 113.80-75 support is needed to negate the positive outlook.
The USD/JPY pair gained some positive traction and climbed to a fresh monthly high during the early part of the trading on Tuesday. Bulls, however, struggled to capitalize on the move and faced rejection near the key 115.00 psychological mark.
From a technical perspective, slightly overbought RSI on the 4-hour chart seemed to be the only factor that capped the upside near an ascending channel resistance extending from the monthly swing low. This should now act as a key pivotal point for traders.
Meanwhile, technical indicators on the daily chart are holding comfortably and are still far from being in the overbought territory. This, in turn, supports prospects for the emergence of some dip-buying and an eventual break through the trend channel.
Hence, any subsequent slide might still be seen as a buying opportunity and remain limited near the 114.35-30 horizontal support. The next relevant support is pegged near the 114.00 round-figure mark ahead of the lower boundary of the mentioned channel.
The latter is currently pegged near the 113.80-75 region, which if broken decisively might shift the near-term bias in favour of bearish traders and prompt some technical selling. The USD/JPY pair might then accelerate the fall towards the 113.10-113.00 region.
On the flip side, bulls are likely to wait for a sustained strength beyond the 115.00 mark before positioning for any further gains. The subsequent move up has the potential to lift the USD/JPY pair back towards November monthly swing high, around mid-115.00s.
The momentum could further get extended and allow bullish traders to aim back to reclaim the 116.00 round-figure mark for the first time since January 2017.
USD/JPY 4-hour chart
