USD/JPY to see a corrective decline before resuming the uptrend

The rally in USD/JPY that kicked-off from around 105.00 gained further momentum over the last week, in what markets witnessed a parabolic rise. However, overbought conditions warrant caution, FXStreet’s Dhwani Mehta reports.

Key quotes

“The USD/JPY pair is likely to hold onto the recent advance although additional upside appears limited.

“From the Japanese calendar, the final revision to the fourth-quarter GDP could offer some trading incentives, as the country’s most prefectures call for bringing an end to the state of emergency.”

“The 14-day Relative Strength Index (RSI) indicates heavily overbought conditions, as it closed the week at 79.20 levels.”

“Any retracement below the 108 level could call for a test of the March 4 low at 106.96.”

“If the buying interest remains stronger, a test of the 200-weekly moving average (WMA) at 109.04 could be challenged. Acceptance above that level is critical for additional upside towards the June 2020 highs of 109.85.”