USD-JPY Sell-Off Running Into Resistance

By: Mike Kulej

Over the last month or so, the USD-JPY pair sold off from 93.00 to 88.25. Not a very large drop, if compared to other Yen crosses, which moved much more, but a significant fall in relation to the most recent history. However, this move may be ending.
Yesterday’s low of 88.25 came very close to the low established during the infamous “flash crash” of early May, which was at 87.94. In addition, looking, farther back, we can see one more low at around this level, made at the beginning of March. The combination of these prior lows makes for a likely strong resistance that the USD-JPY is approaching. Given the prior history near the 88.00 price level, chances are good for the current downtrend to either stall or bounce during the next few days. It does not mean that the prevailing market direction will reverse, but some kind of reaction here is likely.
On the other hand, should this important support be broken on the daily chart, the downtrend could continue for some time. The next meaningful support is at 84.75, a level that might be tested within the next few weeks.