The US dollar has risen to its highest trading levels against the Japanese yen currency in over one-year, as the ongoing surge in the US dollar index provides the much-need momentum to take-out the 110.00 resistance barrier.
Demand for the greenback also increased as the fallout from Archegos Capital caused market participants to revert to previous behaviour, by which I mean buy the US dollar and move away from government bonds.
This week the 10-year US Treasury yield advanced to its highest trading level since January 2020, and it broke above the 1.75% benchmark level, which has further underpinned the US dollar and pressured the yen currency lower.
Another striking feature of the recent upside move above the 110.00 level is the major technical breakout which has taken place across the higher time frames, as a key trendline that has been in play since 2016, was finally broken.
If this major technical breakout remains valid then the USDJPY pair could start to take out some big upside levels over the coming days and weeks. In terms of where bulls may be targeting, the 112.00 level looks a good bet, however, the USDJPY pair could go much higher than this.
Data points from the United States could provide more fuel for the fire. The ISM manufacturing releases is a potential tail wind for the USDJPY pair, as is the monthly US jobs report, which is expected to show that the US economy created 600,000 jobs.
According to the ActivTrader Market Sentiment tool some 78% of traders are bearish towards the pair. Bearish sentiment has increased since last week, however, the price has just continued to rise. This sets up the scenario for a major retail trader short squeeze, and more upside for the USDJPY pair towards 112.00.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that USDJPY pair has invalidated a bearish head and shoulders pattern, after moving above the 109.35 level last week.
According to the overall size of the invalidated bearish price pattern, the USDJPY pair is likely to head towards the 111.00 resistance level over the short-term horizon.
USDJPY Medium-Term Technical Analysis
The daily and weekly time frame shows that a major trendline break has taken place, which has caused the USDJPY pair to race above the 110.00 handle and set a fresh one-year high.
Now that the trendline break has happened the 112.00 and 115.00 levels are the next big upside targets, however, the 118.00 to 120.00 levels are still valid long-term targets for USDJPY bulls now that this important trendline has been broken.