USDJPY Range Breakout, More Upside? – Sept 29, 2014

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USDJPY Range Breakout, More Upside? - Sept 29, 2014

USDJPY Range Breakout, More Upside? - Sept 29, 2014

USDJPY is making an upside breakout from its latest range, as price is pushing past the 109.30 levels. Stochastic is reflecting a potential drop though since the oscillator is moving down from the overbought area. MACD is also suggesting a possible pickup in selling momentum.

However, the moving averages are still confirming the upside for USDJPY, as the 100 SMA is moving above the 200 SMA, with no signs of crossing lower so far. This could mean that USDJPY might move past the previous highs and break above 109.50 for a test of the 110.00 major psychological level.

USDJPY Trading Levels

If the current levels hold as resistance though, USDJPY could still move back to the bottom of the range around the 108.50 minor psychological support. A bounce from this area could keep the uptrend intact and USDJPY on its path to test 110.00.

Event risks for this USDJPY pair include the upcoming data from Japan, which are the household spending, industrial production, unemployment rate, and Tankan surveys. Weak figures would show that the economy still hasn’t recovered from the April sales tax hike and that the BOJ might need to implement additional stimulus in order to keep the economy afloat.

As for the US, the non-farm payrolls report is due this week and might provide correction opportunities for dollar pairs. If the actual figure comes in strong, further breakouts could be seen as market participants continue to price in rate hikes from the Fed early next year. On the other hand, a weaker than expected reading might inspire a much-needed market correction for USDJPY.

As it is, the path of least resistance is still to the upside, as data from the US has been much stronger compared to that of Japan and the Fed is moving closer to tightening while the BOJ is staying open to further monetary policy easing.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.