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(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)
Price action on USD/JPY, a daily chart of which is shown, continues to consolidate just under a key downtrend resistance line extending from the early-April high. This downtrend line exists within the context of a significant parallel downtrend channel. Within this channel, price has been following a short-term uptrend support line extending from the bottom of the channel in early July. Within the past week, price has poked tentatively below this countertrend line several times, but was unable to break it in any significant manner.
Within the context of the overall downtrend, a breakdown below the current uptrend retracement line is a key event to watch for. In this event, a clear downside support target resides in the major 91.00 support/resistance price region. In the event of any significant breakout above the parallel downtrend channel, price should meet immediate further resistance around the 97.00 level, and then further up at around the 99.70 price region.
By James Chen, chief technical strategist, FX Solutions
