The USD/JPY has been an unstoppable force in the past 2-3 months. We have to look at the monthly chart for some perspective because there is nothing but signs of sharp uptrends in the weekly, daily, 4H and 1H charts.
(click to enlarge)
Even the monthly chart reflects a sharp trend that has been developing since the 2011-2012 bottom, which was at historic lows by the way. In September this year,
1) price has broken above the 200-, 100-, and 50-month simple moving averages (SMAs), which shows that the long-term bearish trend could be over. We are talking about a long-term as in 30-40 years, since at least the 1980s.
2) The monthly RSI has pushed above 70 showing it is starting to develop bullish momentum with long-term implication.
3) Price is breaking and testing some trendlines going back to 1998, an 2002.
In terms of a long-term outlook, a break above the 2007 high at 124.16 would confirm. But we are already seeing signs. But let’s pull back for a moment to the short-term. In the coming weeks, USD/JPY is poised to test the 2008 high at 110.68. With the monthly, weekly and daily RSIs all showing overbought condition, we should probably expect some consolidation around or below this 2008-high.
Let’s pull back even further, and take a look at the 1H chart.
(click to enlarge)
The trend is so pervasive, even the 1H chart show a clean bullish mode based on price action, moving averages and the RSI reading. If the market is going to have even a short-term correction, price will have to break below 108.35, and the 1H RSI will have to break below 40. Then, we will probably see some buyers around 108.00 especially if the RSI falls to 30. Then, if price can start holding below 109.00, we can start to confirm a short-term to medium-term bearish correction with downside back to 107.00. Otherwise, if price can push back above 109, the bullish trend is still in play with the 110.65, 2008-high in sight.
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