Bullish Breakout and Continuation: The USD/JPY has been on the move since breaking above 118 and a multi-month triangle consolidation. The daily chart shows the bullish breakout that was followed by a period of tight consolidation before the market confirmed the breakout and pushed the pair towards its 2014-high at 121.70. After last week’s US NFP report, the greenback gained across the board, and the USD/JPY cleared above 120.00.
New Highs: This week, price broke the previous high of 121.70, as USD/JPY tags the 122 level heading into the Tuesday (3/10) session. Based on the technical conditions in the daily chart, 1) price action, 2) moving averages 3) RSI, there is a high likelihood that USD/JPY will continue beyond 122, which essentially puts it at 8-year highs.
The 2007 high is at 124.16. The usd-yen is poised to test this level. A break above will open up 13-year highs not seen since Nov. 2002, where there is a resistance around 125.64. The 2002 highs will be in the 135-135.16 area.
As we can see in the daily and monthly charts, the bullish outlook is dominant and has the 124.16 and 125.64 resistance pivots in sight. In the short-term however, we might want to look for a dip first.
There are a couple of reasons to look for a pullback.
1) The market is essentially testing the 2014-high and the 122-handle, a psychological resistance.
2) There is a bearish divergence in the 4H chart between price and the RSI.
3) There is a reversal candlestick combination.
Now, if there is a pullback, we should start looking for support around 120 as price enters the cluster of moving averages and approaches the projected rising speedlines from around 117. If the RSI also tags 40, get ready for the bullish continuation (notice the 4H RSI bouncing off 40 since February.)
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