Last week, the greenback was resilient. However, this strength has not proven to stay and in the USD/JPY it is still within the context of sideways action. Let’s take a look at the usd-yen pair from a technical perspective.
As we can see in the 4H chart, USD/JPy rallied from about 118.50 back to around 120 to end last week. As we start this week, the pair is still holding above 120, but it has flattened just before entering a consolidation ranges resistance area between 120.36 and 120.84.
If price does fall back below 120, we should monitor the 119.50 area. If the market is turning bullish USD/JPY should bounce off of 119.50, which would put pressure on the consolidation resistance area again.
However if USD/JPY falls below 119.40, the pressure returns to the 118.33-118.72 support area.
Now, if price holds above 120, and attacks the 120.36-120.84 area, let’s first expect some resistance especially if we see a bearish divergence between price and the RSI reading in the 4H chart. Again, the same anticipation goes if there is a retreat from this resistance area – monitor the 119.50 area for support.
The daily chart reminds us to stay slightly bullish because the trend between the multi-month consolidation was bullish. Also, within the consolidation range, price has been holding above the central pivot, which is around 118.33-118.50. The daily RSI has held above 40, which reflects maintenance of the bullish momentum. Price has held above the 200-day SMA, and is actually above the 100-, and 50-day SMA if it can hold above 120.
Therefore, let’s air on the side of a bullish outlook, but be patient and understand that we have been in a choppy market for months. A break above the 120.85 resistance will be needed to liberate the USD/JPY from the April consolidation, and open up the 122 high with risk of continuing the medium-long-term trend bullish trend and breaking higher.
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