The USDJPY has fallen to a new session low and in the process is back down testing the 38.2% retracement of the last trend leg to the upside (and moving below as I type).
That leg higher started on April 14 and concluded on April 20.
Since then the price decline has been able to stay between the 38.2% and 50% retracement of that move to the upside. The last two tests have stalled near the 38.2% retracement. As I type, the price is making a more substantial break below that level currently trading at 127.67.
On the downside, the rising 200 hour moving average comes in at 127.354. The aforementioned 50% midpoint of the move up from April 14 comes in at 127.238.
Why use the last trend leg higher?
Looking at the daily chart, the USDJPY last major bottom before the two month surge to the upside stalled right at the 100 day moving average back on February 24. The price at that time was at 114.400. The March run to the upside took the price all the way up to 125.335 (1100 pips) before there was a meaningful correction.
That correction stalled ahead of the 38.2% retracement of the first trend move higher (at 121.008). A second trend leg started on March 31 at 121.271 and extended all the way up to 129.400 (813 additional pips). The 38.2% retracement of THAT move comes in at 126.295. That retracement will be a target on further downside momentum, but it is still 150+ pips from the current level.
Traders often need closer clues of a potential shift (especially more short/intermediate term traders). That is for buyers and sellers.
Hence the move from the April 14 low (which also corresponded with the March high - see red circles on the daily chart) as an interim trend leg. If the price can get below the shorter retracement, it is showing some progress. If it can't, the buyers remain empowered with the control.
Putting it another way, if the price can't get below the closest trend leg retracement level (i.e., the 38.2%-50% off the hourly chart), it can't get close to the further out retracement levels (i.e. the 38.2% at 126.295 from the daily chart). The buyers are still winning and the sellers are not.
