Downside risks prevailed during the Asia session which pushed the rate down to the 55-, 100– and 200-hour SMAs and the weekly PP circa 107.20. The bottom boundary of a four-week channel is likewise located there. The Greenback should eventually breach this channel to the downside and test the 106.70 area, as it has not been able to surpass 107.65 for several sessions.
However, technical indicators suggest that a breakout of the aforementioned support cluster should not occur today. In this case, a possible upside target is the 38.20% at 108.10.
Despite technical indicators flashing bullish signals, the US Dollar was driven by strong downside momentum on Monday. During this time, the pair managed to breach the 100– and 200-hour SMAs and the prevailing seven-week channel circa 107.20.
On Tuesday morning, the nearest support was set by the weekly S1 and the 23.60% Fibonacci retracement at 106.75 and a two-week support level at 106.66.
The pair is expected remain in the 106.70/107.30 range during this session. It could still edge lower within the following hours prior to reversing northwards and testing the breached moving averages.
The southern barrier should hold firm, while the 107.15 area might actually surrender under the bullish pressure if solid US fundamentals add some upside volatility to the market.
Tuesday was rather uneventful for the USD/JPY exchange rate, as it spend the majority of the session slightly below the 100– and 200-hour SMAs.
The US Dollar eventually gathered enough momentum to dash through this resistance cluster early today. As a result, it was located near the boundaries of two channels circa 107.40.
From theoretical point of view, the rate should reverse near this area. However, it is more likely that the rate continues pushing higher, given its ability to surpass the comparatively strong resistance cluster near 107.15.
The nearest northern barrier is set the monthly R1 at 107.50, while a more probable upside target for today is the upward-sloping trend-line at 107.80.