USD/JPY has been bearish so far in 2015. However, this decline is within the context of a prevailing secular bull trend that started in 2011. Last week, USD/JPY did make a new low on the year, but found support around 116.
Key resistance: Now, to the upside, 118 remains the barrier as it has shown to be in a support/resistance pivot area. If price can break above 118 this week, we can start considering the bullish continuation scenario.
On a pullback, price should hold above 117, in which case, the market will be more confident of the bullish outlook.
More Resistance: 119.00 might be next barrier. A clear break above 119.00 with the RSI pushing to 70 would be an even stronger more developed bullish signal. In this scenario, the 118 level should become support, and the common resistance around 120.70-120.80 will be in sight.
In this bullish scenario, let’s also look at the 120.00 level with respect as resistance. It was a support/resistance pivot area, and we can see that it is reinforced by a falling speedline in the daily chart.
Still Bullish: Note that the daily RSI broke below 40 briefly but is now returning above it. This shows a slight violation of the bullish momentum, but forgiving this brief violation, the bullish momentum is still in play.
Now, if price does not break above 118.00, the pressure will remain on the 116 pivot and the 115.56 December-low,.
The Bearish Scenario: A break below 115.50 will first open up the 114.00 handle where we see some support, with the 100-day SMA just under. Then below 114.00, the USD/JPY would open up the 110.00 low. These bearish outlooks are not likely unless the BoJ discusses normalizing monetary policy. Most likely, the BoJ will maintain its current stance.
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