The USDJPY backs off from the new 20 year highs reached yesterday

The  USDJPY  continued it’s run to the upside this week and in the process continued to make new 20 year+ highs. The pair moved up to 131.253 yesterday.

The USDJPY pair is now up for 8 consecutive weeks and 9 of the last 10. During those 10 weeks, the price has a low to high range of 1684 pips or 14.73%. The catalyst has been sharply higher US rates while the Japan rates have remained steady.

Today the price has backed off a bit, and currently trades at 130.08.

Drilling all the way to the five minute chart below, the USDJPY pair did correct lower earlier in the week, bottoming on Wednesday. After breaking above the 100 and 200 bar moving averages on Wednesday, the price started to trend higher – and stayed mostly above the higher 100 bar moving average in the process (follow blue line). There was a brief dip below the moving average line after the worse than expected US GDP data yesterday, but that was quickly reversed.

Nevertheless near the close yesterday, the price dipped below the rising 100 bar moving average and started a corrective move to the downside. In the Asian session a bounce up toward the then converged 100 and 200 bar moving averages at 130.79 (see chart below) found willing sellers. That hold, was the the catalyst technically for a bigger corrective intraday move to the downside. The sellers found some comfort and short-term control.

Often times, the nuances of a corrective move in a trending market can be found in the shorter term 5 minute chart. That was the case today especially after the retest of the converged 100 and 200 bar moving averages held resistance.

The correction off of the high reached down to 129.753 – a 104 basis point correction from the 100/200 moving average levels. However the low price did stall ahead of the 38.2% retracement of the move up from the Wednesday low. That level comes in at 129.597. Getting below that level would still be needed to give sellers more control in the short term.

Since bottoming today, the price has moved back above the the falling 100 bar moving average on the five minute chart (currently at 130.164), but has been able to stay below the falling 200 bar moving average at 130.418.

Watch those moving averages for intraday clues. The short term traders still hold some control, but are still remain a little gun shy given the trend like moves seen in the pair over the last 10 trading weeks. This correction is simply a minor blip in that bigger move (just look at the weekly chart above).

Nevertheless, if the technicals can remain tilted to the downside in the short term, there is room to roam on the downside, but levels like the 38.2% retracement, the 50% retracement of the move up from Wednesday’s low at 129.088, the 100 hour moving average at 128.829, and the 200 hour moving average at 128.58 all need to be broken to increase that short /intermediate term bearish bias.

The roadmap is in place. Which way will the market traders drive – above the shorter term MAs or below the 38.2% and other downside target?

PS. The declines come despite a rise in yields today which is of interest. US stocks have restarted the move to the downside.