The US Dollar Index’s failure to sustain its recent mini-recovery is a topic for another time, today, it matters because USD/JPY is approaching critical support at 101.20 – this is the bottom of the range from February and also coincides with the 200-day sma at 101.23.
This is significant, as 101.20 has prompted a reversal three times since March, as you can see on the chart below. How this pair reacts in the next few hours could be critical for the medium-term outlook, as a break below this level will be a negative development that could pave the way for further losses towards 100.76 – the low of the year so far.
From a broader angle, a failure of 101.20 may suggest that the USD resurgence, triggered after the ECB meeting earlier this month sent the EUR lower, could be coming to an end, and EUR/USD and GBP/USD may have made temporary lows in the short term.
At this point, a daily close below 101.20 would be a bearish development that could open the way to further losses.
If this happens then key support levels include:
- 100.76 – the February 4th low.
- 99.96 -0 61.8% Fib retracement of the October – January advance.
If this pair can bounce off this level once more then short-term resistance includes:
- 102.36 - May 13th high
- 102.03 – May 2nd high
Takeaway:
- This pair is approaching key support at 101.20.
- This level has held three times since March.
- A break below this level would be a negative development that could trigger further downside.
- If we do fall below 101.20 it could signal an end to the mini-dollar recovery, which may trigger short term recoveries in EUR/USD and GBP/USD.
