Forex: USD/JPY breaks initial support of 97.95, now down 75 pips at 97.67

FXstreet.com (Barcelona) - The USD/JPY continues to leak lower, breaking initial support near 97.95 (the 9 DMA). The pair has not traded below this key short term moving average since April 4th. Earlier in the session, the pair traded as high as 98.71, but was unable to maintain a bid after China GDP missed expectations and Yen carry trades began to unwind.

From a technical perspective, the weekly chart formed a shooting star candle last week which is a bearish development and could prompt further selling in the pair this week. According to Fan Yang of FX Times, “The USD/JPY continues to retreat from the 100 handle. The 1H chart shows a broken wedge as price dips, reflecting at least some short-term profit-taking after a bullish April so far (as well as a bullish trend started in Oct/Nov. 2012). As we get closer to 98.00 we should probably see at least some short-term support”.

He later added, “In the 4H chart, the RSI is at 40, which could reflect end of a corrective swing during a bull market. In other words, if the market is to remain bullish in the 4H chart, the market should find support soon and hold the RSI above 40 (given some elbow space of course).”