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The US dollar continues to make solid upside traction against the Japanese yen currency, following last week’s major breakout above the 104.50 resistance level. The move higher in the USDJPY pair has also coincided with strong upward momentum and subsequent technical breakout in the US dollar index.
It is certainly interesting that the USDJPY pair was amongst the first of the major pairs to breakout to the upside, which hints at strong demand for this particular pair. Also, the pair has been trapped in a period of consolidation for many weeks now, adding to the power of the breakout.
In order for the breakout in the USDJPY pair to continue its recent upside trajectory the US dollar index would almost certainly need to cement further gains and maintain a sustained breakout above the 91.25 level.
From a technical perspective, the USDJPY pair is still in a bearish trend while trading below its key 200-day moving average, around the 105.50 level. This could be the key battle ground for the pair in the days ahead if bulls remain in control.
In terms of key technical indicators, the Parabolic Indicator has turned bullish on a daily and weekly basis for the first-time since July of last year. This is not an insignificant event, and certainly suggests that the breakout may have legs.
The Parabolic SAR indicator helps to identify potential trend changes. In accordance with the indicators parameters, the monthly trend in the USDJPY pair will turn bullish if the pair moves above the 110.00 level, which is still some way off from current levels.
Other important technical indicators are also showing new buy signals. The MACD indicator on the weekly time frame has turned bullish for the first-time since February last year and is issuing a strong buy signal.
The Relative Strength Indicator, another key measure of strength and weakness has turned bullish for the first-time since June last year on a weekly basis and is currently generating a bullish reading of 55.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has now broken a critical trendline. The mentioned trendline is taken from a large falling wedge price pattern, which the pair had previously been trapped in for multiple weeks.
According to Ichimoku indicator on the four-hour time the USDJPY pair has cleared all forms of short-term resistance. With that said it may be prudent to look at the Bollinger Bands indicator for potential price targets and breakout areas.
Source by ActivTrader.
The 105.30 level is where the upper Bolling band is currently located. This Bolling Bands are currently rising as well, which is a bullish sign. A breakout above the 105.30 level could create tremendous upside pressure and prompt the next upside breakout towards the 105.50 and 105.85 areas.
USDJPY Medium-Term Technical Analysis
The Ichimoku indicator on the daily time frame shows that the USDJPY pair could start to trade towards the 106.60 level now that the technically important 104.50 level has been overcome.
A bullish breakout from the upper Bolling Bands has taken place on the daily time frame this week, following the recent upside move and series of daily price closes above the 104.80 level.
Source by ActivTrader.
The weekly Bollinger Band offers strong upcoming resistance around the 105.85 level, while the mid Bollinger Band on the monthly time frame presents a more realistic monthly upside price target, at 106.50.
