The US dollar has well above the 115.00 level against the Japanese yen currency as the breakout in the US dollar index shows few signs of stopping during its recent turbo-charged run towards the 97.00 hand.
Yesterday’s major data dump was a big mover for the US dollar as the Fed’s preferred inflation gauge, namely Core PCE Price Index, jumped to a 30-year high and the Initial Weekly Jobless Claims also printed solid readings.
Federal Reserve Bank of San Francisco President and FOMC member Mary Daly also highlighted the need to speed up tapering. Also, the hawkish FOMC Minutes is a positive for the USDJPY pair.
In order for the USDJPY pair to continue higher, we probably need to see equity markets rallying into year-end. The 116.00 level should be watched closely, as it remains a gateway for 118.00 or a potential reversal zone for 114.00.
COVID-19 concerns are also likely underpinning the US dollar’s safe-haven demand, which should help USDJPY buyers. Record high cases in Germany triggered multiple warnings to recall the lockdowns from the region.
We should consider that the USDJPY pair did fall during the first lockdown as stocks came off, so if the Nikkei225 did dip lower alongside global stocks then the USDJPY pair could also turn lower.
According to the ActivTrader Market Sentiment tool shows that some 91% of traders are bearish towards the USDJPY pair, which may hint those further gains are coming in the near-term as bearish sentiment is still extremely high.
The sentiment skew in the USDJPY pair is so high at 91& it does also scream of a potential reversal as bears must be feeling extreme pain at this juncture.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair has invalidated a large head and shoulders pattern, and this is one of the reasons why the USDJPY pair is getting slammed.
According to the overall size of the invalidated bearish price pattern the USDJPY pair could be preparing to stage a move the 116.00 to 116.30 area over the short-term horizon.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has broken to the upside from a triangle pattern level and is a major driving force behind the sharp upside move over the last few days.
According to the mentioned time frame and the size of the pattern an important test towards multi-year trendline resistance, around the 116.00 area seems assured if bulls can hold above the triangle.