- USD/JPY’s path of least resistance appears to the downside.
- A potential death cross on 1H chart risks further declines.
- A minor bounce to 21-HMA cannot be ruled out, as RSI recovers.
USD/JPY holds the lower ground below 104.00 heading into the European open, mainly undermined by the persistent weakness in the US dollar amid economic rebound expectations.
Further, upbeat Japanese Industrial Production and Retail Sales for October cheer the JPY bulls, weighing further on the spot. Meanwhile, falling S&P 500 futures also collaborate with the downside in the major.
From a near-term technical perspective, the spot is trending in a falling wedge formation over the last one week on the hourly chart.
The price is teasing a bearish breakdown, with the pattern likely to get confirmed on an hourly close below the falling trendline support at 103.82.
However, markets are not ruling out a minor bounce, given that the Relative Strength Index (RSI) has bounced-off lows and heads higher towards the midline.
The bearish 21-hourly moving average (HMA) at 104.01 could challenge the recovery attempt. Above which the critical barrier at 104.10 could be put to test.
It’s worth noting that a death cross is in the offing as the 50-HMA tends towards the 200-HMA, looking to cut the latter from above.
Therefore, the downside appears more compelling in the near-term.
USD/JPY: Hourly chart