USD/JPY Price Analysis: Inventory adjustment is in progress, 50-EMA a key support

• A tad longer inventory adjustment process after a juggernaut rally favors a distribution.
• The 50-EMA has acted as major support for the greenback bulls.
• An oscillation in the 40.00-60.00 range by the RSI (14) still holds a consolidation bet.

The USD/JPY pair has witnessed a pullback move after dropping to near 144.00. Broadly, the asset is testing the downside break of the chartered territory plotted in a narrow range of 144.40-144.90. Signs of exhaustion in the upside trend are lucid and transparent and the greenback bulls could surrender their grip going forward.

On a four-hour scale, the major is auctioning in an inventory adjustment process, which indicates a tad longer consolidation period. It is critical to state that the adjustment process is an accumulation or distribution by institutional investors. Odds favor an inventory distribution as the asset is displaying signs of momentum loss.

It is ‘fit and proper to claim that the 50-period Exponential Moving Average (EMA) at 113.80, at the time of writing, has been a major cushion for the greenback bulls. Once a volatile event has already halted the harmony but luckily overstepped it again. A consecutive surrender of the 50-EMA will weaken the greenback.

The 200-EMA at 141.20 is scaling higher, which indicates that the long-term trend is still solid.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a continuation of rangebound moves ahead.

For a decisive bearish reversal, the asset is required to drop below the previous week’s low at 140.35. An occurrence of the same will drag the asset towards the August 30 low at 138.05 followed by the August 23 low at 135.81.

Alternatively, the greenback bulls could drive the asset higher after overstepping the previous week’s high at 145.90, which will drive the asset towards the August 1998 high at 147.67. A breach of the latter will send the major towards the psychological resistance of 150.00.

USD/JPY four-hour chart