With markets now pricing in a 60% chance that the US Federal Reserve will step up and reduce its Policy Rate by 50 basis points on Wednesday, the US dollar (USD) is on the ropes today. This has pushed the EUR/USD above its 50-month simple moving average at US$1.1095, directed the US Dollar Index towards significant support around 100.00, and positioned the USD/JPY (USD versus the Japanese yen) within a stone’s throw from monthly support.

Monthly Support Ahead

Technically, the USD/JPY recently breached the higher low formed in December 2023 at ¥140.25 and paved the way for a move toward support on the monthly timeframe at ¥138.42. You will also acknowledge that the Relative Strength Index (RSI) dipped under the 50.00 centreline, indicating negative momentum (average losses exceed average gains). This also followed the RSI forming negative divergence earlier this year.

Daily Support Cleared

From the daily timeframe, following the recent breach of a support zone between ¥141.68 and ¥141.06 (now marked as possible resistance), the next obvious downside objective on the daily chart lies at ¥138.47, a handful of pips north of the monthly support mentioned above at ¥138.42.

So, with room for sellers to continue pushing south on the monthly chart and daily action recently consuming support, the area between daily and monthly support at ¥138.47 and ¥138.42, respectively, could be a reasonable downside objective for current shorts.

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