USD/JPY Threatening a Long-term Trendline from 2008

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USD/JPY Threatening a Long-term Trendline from 2008

US Data during the 9/4 session continued to support the case for an earlier rate hike by the FOMC. The expectation has been anchored around mid-2015. After terrible Q1 data, expectation pushed back, but since Q2, data have provided grounds to raise rates before mid-year.

9/4 US Data:
We saw trade deficit narrowed slightly from -40.8B in June to -40.5B in July. Jobless claims had a 302K print for the most recent week, staying around 300K, and reflecting a trend that has been declining since 2010 – which is a good thing. ISM Services PMI improved to 59.6 in August after a 58.7 reading in July.

This is nothing eye-popping, but with the BoJ staying course, USD/JPY rallied above the previous 2014-high, officially making it a bullish year after about half a year of consolidation.

The daily chart shows us that the pair was consolidating until the bullish attempt in mid-July that is still extending. The consolidation was a descending triangle, and the July-August price action confirmed the breakout. Then during the end of the 9/4 session, and beginning of the 9/5 session, price made a fresh high on the year.

USD/JPY Daily Chart 9/5
usdjpy 9/5 daily chart

(click to enlarge)

When you jump to the monthly chart, you actually see price testing a key resistance factor – a falling trendline from the 1998 high of 147.66. Perhaps a break above 106 will be needed to show a break above this line. Then the next key resistance might be up at 110.65, which is a key resistance pivot in 2008. USD/JPY definitely looks like it is developing a long-term bullish attempt with such an aggressive rally since 2012.

Even though we might see overbought conditions in many time-frames, we should limit our bearish outlook to the short-term, and at most the medium-term, with the anticipation that buyers will be buying on the dip with a long-term bullish outlook brewing.

USD/JPY Monthly Chart
usdjpy monthly chart

(click to enlarge)

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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.