The USD/JPY is once more ignoring technical levels. Namely, after signalling a surge and breaking through resistance levels on Thursday, the rate immediately began a decline, which had reached down to 108.80 on Friday.
Meanwhile, take into account that the rate has become oversold due to the sharp move down.
Bureau of Economic Analysis released the US Prelim GDP data, which came out in line with expectations of 3.1%.
According to the official release: "Today's estimate reflects downward revisions to nonresidential fixed investment and private inventory investment and upward revisions to exports and personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, were revised up; the general picture of economic growth remains the same."
The week will end with the Canadian GDP publication at 12:30 GMT. This event has caused moves from 21 to 64 pips since December.
USD/JPY short-term daily review
From a technical analysis perspective there are two scenarios for the USD/JPY. Namely, it can surge or decline.The pair has no technical support as low as the 108.45 level. Due to that reason it could decline down to that level.
Meanwhile, the pair is oversold, as the just experienced drop has been sharp and has left all of the hourly simple moving averages far above.
Essentially, the rate will trade sideways until the bulls or the bears take over and a sharp move occurs.
Hourly Chart
On the daily candle chart the rate has revealed a descending channel pattern.Meanwhile, note that the recent surge up to the 100-day simple moving average that was followed by a decline reduced the pressure of the rate being oversold.
In general, the daily candle chart signals a decline.
Daily chart
On Thursday, traders were still long. 63% of open position volume was in long positions.
Moreover, on Friday the sentiment was 70% long. Traders were mostly long, and they were suffering losses during the decline.
Moreover, a 70% indicates clearly that the rate is overbought in the short term. Namely, these positions will be closed, if the decline continues, and that would boost the decline of the rate.
Meanwhile, trader set up pending orders were bullish, as 61% of pending commands in the 100-pip range were set to buy.