USD/JPY traded higher yesterday, and during the Asian morning Tuesday, it emerged above the resistance (now turned into support) barrier of 112.85, marked by the peak of the 21st of September. The pair continues to print higher peaks and higher troughs above the uptrend line drawn from the low of the 7th of September and thus, we would consider the short-term outlook to be positive for now.
We believe that the break above 112.85 may have opened the path towards the 113.15 hurdle, defined by the peaks of the 18th and 19th of July. Another break above that resistance may set the stage for larger bullish extensions, perhaps towards the 113.65 territory, marked by the high of the 21st of December.
Taking a look at our short-term oscillators, we see that the RSI rebounded from its respective upside support line but hit resistance near 70 and turned down. The MACD lies above both its zero and trigger lines but shows signs of slowing down near its own downside resistance line. Thus, although both indicators detect positive momentum, we would stay cautious of a possible setback, perhaps after the rate challenges the 113.15 level, or even from current levels, for a test near the uptrend line.
In order to abandon the bullish case and start examining whether the short-term trend has reversed to the downside, we would like to see a clear dip below 112.45. Something like that would confirm a forthcoming lower low on the 4-hour chart and is possible to initially aim for the 112.10 support zone. Another break below 112.10 could encourage the bears to drive the battle towards the 111.65 obstacle, defined by the low of the 18th of September.
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