This is one of the best weeks that USD/JPY had so far. A strong spike that broke the key area of resistance at 111.40, marked by May’s high, opened the path towards levels last seen in January. The pair keeps holding on to its upwards moving trendline drawn from the 25th of March and thus, we remain bullish for the near term.
As long as the aforementioned trendline remains intact, we will stick to the upside and aim for higher levels again. We can see that USD/JPY found its resistance around the 112.80 zone. Another push to that zone and eventually a break of it, could lead to further acceleration and the pair could then start aiming for the 113.40 level, marked by the high of the 8th of January.
Because USD/JPY has already made a good move to the upside, there is a likelihood that we could see a bit of retracement back down before the next positive leg. The recently broken levels of resistance could now become strong areas of support. If the pair decides to move lower, then this could open the path towards the 112.17 level, where USD/JPY found its resistance at on Wednesday. Certainly, a break below could trigger some more selling and the rate could drop to the important 111.40 area. If that area is not able to withhold the pair from moving lower, then this could open the door all the way back to the previously mentioned upside trendline, where the bulls could try and jump back into the driver’s seat.
For us to become bearish, we would need to see a break and a close below that trendline. Another good confirmation of weakness could be a close on the day below the 110.25 hurdle, which could open the way for a test of the 109.35 zone, marked by the lows of 25th and 26th of June.
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