The USD has been strong for the past few sessions. The USD/JPY and USD/CAD have both rebounded to key levels. Let’s take a look at the charts.
USD/JPY has been trading in a range roughly between 118.33 and 120.84 since the end of March. The market shows price and moving averages moving in a messy but ultimately sideways manner. The RSI oscillated between 70 and 30. This almost 2-month long consolidation is setting up for a strong breakout. This week, it looks like price is going to test that 120.84 resistance. A break above would open up the 2015-high around 122 and maintain a bullish bias within a multi-month consolidation range.
As we can see int he daily chart, the prevailing trend before the consolidation started in December 2014 has been bullish. Thus, the short-term bullish outlook can easily extend into a medium-term one above the current high of 122.02. Only a break below 118.33 would take away the bullish bias, and only a break below 115.55 should open up a bearish outlook outside of the short-term.
Last week, USD/CAD rebounded from 1.1903 and it starting this week with a break above 1.2205, which puts in a price bottom. IT is now hanging around 1.2250, around the 200-period SMA in the 4H chart, and just under a falling trendline.
This is a very significant pullback as it pushed the 4H RSI above 60, which shows loss of the prevailing bearish momentum. The RSI pushed above 70, which shows revival of bullish momentum.
While the 4H chart shows that a break above 1.2250 could neutralize the bearish outlook, the daily chart shows that it will take a break above 1.2350 to open up a bullish one. Otherwise, if price holds under 1.2350, USD/CAD would still be bearish-neutral if not bearish, and the pressure would return towards the 1.1903 low on the year, or a more common support around 1.1950.
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