In a 4-hour chart, the USD / JPY pair broke below the 200 EMA and the 21 SMA located at 109.90. The pair is now trading below this level showing a bearish signal.
The USDX dollar index is very weak as it is consolidating below the 200 EMA. This weakness is due to the moderate words of the head of Jerome Powell, the US Federal Reserve's Chairman. He brought up the issue of tapering its bond purchases. The temporary greenback's weakness is helping the Japanese yen to strengthen.
The psychological level of 110.00 is a mental barrier for buyers because on previous occasions the pair has stopped its upward movement around this level. In addition the 2/8 line of murray located at 110.15, this has prevented USD / JPY to continue its rise.
Given that the 110.15 level and the 200 EMA are close to the 110.15 and 109.90 level, it is likely that as long as the yen remains below this level there could be a fall to the support zone of 109.37 level of 0/8 of murray.
The short-term outlook could remain bearish. As long as the price remains below 110.15, the Japanese Yen could fall to the level of 108.98 and in the medium term fall to the low of May 25 at 108.59.
In Japan, the data released yesterday were generally encouraging. The retail sales for July logged an increase of 1.3%, exceeding the expected 1.2% and the retail trade in the same month advanced at an annual rate of 2.4%. This factor could trigger the fall of USD / JPY to the level of 109.00.
The technical reading of the eagle indicator, that measures the strength and volume of the market, is showing a bearish signal, which could be a good point to sell below 109.90 with targets at 109.37 and 108.98.
Support and Resistance Levels for August 31, 2021
Resistance (3) 110.93
Resistance (2) 110.54
Resistance (1) 110.15
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Support (1) 109.37
Support (2) 108.98
Support (3) 108.59
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Trading tip for USD/JPY for August 31, 2021
Sell below 109.90 (EMA 200), with take profit at 109.37 and 108.98 (-1/8), stop loss above 110.15.
