HKD/JPY 4H Chart: Rectangle

The Hong Kong Dollar is trading against the Japanese Yen in a rectangle pattern. Formation of this continuation figure started shortly after the Yen appreciated by 2.36% on May 16 and 17. By this time the rectangle already has two equivalent reaction highs, which were formed by the monthly PP at 14.3571 and 200-period SMA near 14.3302, as well as the two reaction lows, which were set up by the monthly S1 at 14.0242. It is likely that additional pressure from the weekly R1 at 14.3466 might push the rate downwards one more time before making a breakout. On the other hand, the 55- and 100-period SMA might serve as a support level and prevent the rate from downfall. Nevertheless, a breakout downwards is still the most possible scenario, as it would prolong the existing general downtrend.