USD/JPY Showing Signs of Bullish Continuation

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USD/JPY Showing Signs of Bullish Continuation

Bearish Correction Complete?
It’s been a down month for the USD/JPY, but it looks to be reviving its prevailing downtrend. Let’s take a look at the 4H chart first.

USD/JPY 4H Chart 10/23
usdjpy 4h chart 10/23
(click to enlarge)

Bullish Breakout and Confirmation:
The 4H chart shows that price fell from September’s and the 2014 high of 110.08 down to 105.19 before rebounding. We started the week with a brief break above 107.00 then a bearish attempt. This bearish attempt cracked last week’s rising trendline, but rebounded immediately. This false breakout to the downside could be translated as a bullish signal. Note that it also respected a previously broken resistance line as support, adding to the case of a bullish market in progress.

Anticipating Resistance Around 108: We might get some sellers if USD/JPY reaches the 108.00 handle, which is also where the 200-period SMA resides. The RSI might be around 70 as well showing some near-term overbought condition. If price can hold above 106.80 or so, the bullish outlook should remain. A break below 106.50 would likely keep the USD/JPY in a consolidation mode or even further bearish correction if price starts to have trouble pushing above 107.50 again.

Bullish Extension:
Today, during the 10/23 session, price pushed above a support/resistance area around 107.50. The RSI pushed above 60, which reflects the loss of October’s bearish momentum. It does look like USD/JPY is ready to continue its uptrend after October’s almost 500-pip correction.

The daily chart also provides a case for bullish continuation.

USD/JPY Daily Chart 10/23
usdjpy daily chart 10/23
(click to enlarge)

Bullish Signs after a Pullback:
Before July, USD/JPY was consolidating In July-August, price shot up and thus revived an uptrend since 2012. After the retreat from 110, price came down to the previous 2014-high around 105.44 and respected that as support. Even though price did breach this level, we saw in the 4H chart how fast it stabilized above it and rebounded.

Furthermore, price is holding above the 50-day SMA after testing and cracking it. This shows that the bulls are still in control of this market.

Finally, the daily RSI held above 40 after tagging above 80. This shows maintenance of the bullish momentum in the July-September months.

The USD/JPY thus looks poised to retest that 110 area again, with further upside risk because the prevailing uptrend from 2012 is still intact.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.