Red line- resistance
Blue lines- bullish divergence
USDJPY is trading around 133.17. Price remains in a bearish medium-term trend as price continues making lower lows and lower highs. The red downward sloping resistance trend line is at 135.20. As long as price is below this level we remain bearish. The RSI however has provided several higher lows diverging from the lower lows of the price. We usually see this behaviour some time before a reversal. The RSI bullish divergence is a warning and not a reversal signal. Traders need to be cautious. As we explained in our wave analysis, there are increased chances that USDJPY makes a new lower low. If a new lower low is combined with another bullish divergence, then aggressive traders will be looking to enter new long positions as the chances of a reversal will have increased dramatically.
