USD/JPY Readying to Breakout of its Two-Plus Month Range
- EUR/USD eyes continuation lower from bear flag below $1.0890/95.
- USD/JPY acting more bullishly in recent days, eyes above ¥120.80.
As EUR/USD's bear flag has resumed its longer-term thrust lower alongside recent attempts at new lows in EUR/AUD and EUR/GBP, one pair has been overlooked due to its lack of - pardon me - interesting price action over the past two-plus months: USD/JPY. This narrative is expiring, however, and USD/JPY now warrants consideration for the rest of the year, and very likely into Q1'16.
USD/JPY price action in recent days has actually been anything other than boring. There are nascent indications that the market is turning more bullish, which suggests a breakout of the recent ¥118.20/¥121.80 range could be around the corner. Of note, USD/JPY was capped by its daily 8-/21-/34-EMA envelope from August 24 until October 22; only after the ECB meeting on October 22 was USD/JPY able to close above these levels.
Since the ECB meeting, the script has flipped: price has been treating the EMA envelope as support, with no daily close below the daily 8-EMA since October 22. Taken into consideration alongside the recent bullish shifts in Slow Stochastics and MACD, and it appears momentum is starting to build to the topside for USD/JPY.
--- Written by Christopher Vecchio, Currency Strategist
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