Japanese yen bulls have pounded USDJPY lower a little over a week now.  This has brought the exchange rate to 78.45 from the short term high of 81.50 back in the beginning of July.  But can we expect another leg lower?

Very possibly.  But, for now, probabilities are siding with a short upside reprieve as the currency pair tests support at 78.50.  The level coincides with the July 13th low, and will act as the key barrier in the next couple of sessions.

Should the price action remain above the level, we anticipate an immediate retest of resistance at the 79.00 big figure (acts as a confluent barrier with both 50 and 100 SMAs).  The level is key to any upside moves as it also coincides with a longer term descending trendline.  Penetration above this would certainly be good for any advances – as it confirms a technical shift in momentum.

Medium term targets are in the 79.66 area (38.2% fib from 81.46-78.49 bear wave).  Supportive of the move is a major bullish convergence in the MACD oscillator.

However, a break through support of 78.50 would complicate matters.  With no support in site, the next level of interest would fall to the March 17th low of 76.31.