USDJPY Weekly Technical Perspective: Dollar Breakout Drives Higher to Test Resistance
Technical Forecast for the Japanese Yen: Bearish
- Daily USDJPY chart shows the pair pressing 50% fib resistance near 111.49
- Dollar broke out from descending wedge on Thursday, allowing bulls to press higher
- The top of the recent wedge offers a new level of minor support to watch in the week ahead
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At the start of the week, the dollar-yen pair was trending lower as it continued to form a descending wedge. However, 110 proved to be a level of support it could not remain below for long. After trading under the trend-line dating back to 2015, the psychological level of 110 was tested next. As bears remained in control, the psychological level was cast aside and the pair moved to press the 38.2% Fibonacci support level at 109.824. The confluence of support proved too much for the yen and bulls came surging back Tuesday through Thursday.
USD/JPY Price 60-Minute Time Frame, July 2018 - Present
Thursday offered the most significant move for the pair as the dollar traded higher, breaking out from the descending wedge with conviction. The dollar continued gains into Friday until some fundamental developments, in the form of Fed Chairman Powell’s comments, stalled gains. The run-up on Friday also probed the 50% level at 111.49 before receding, suggesting a combination of technical and fundamental resistance worked in tandem to stall a larger run.
Looking ahead, we now have an interesting opportunity in the pair. With the descending wedge in the rear-view mirror, the upper border of the wedge provides some minor support for the dollar moving forward. Furthermore, the trend-line from 2015, the psychological level of 110, and the somewhat minor 38.2% fib level, produce a few options for the dollar to fall back on for support.
USD/JPY Price Chart 24-Hour Time Frame, December 2017- Present
While it is highly unlikely each level will offer substantial support, it is also unlikely the pair passes through all of them without a substantial fundamental development. With that in mind, the support zones should be watched closely to use as entry points into the continuation of the bullish run posted Tuesday through Thursday.
On the upside, the pair faces resistance at the 50% fib level and a trend-line from 2015 to the July 2018 high. Should the dollar press above the 50% resistance, expect bulls to make a concerted effort to test the trend-line.
Other Weekly Technical Forecasts:
EUR/USD Technical Outlook: Euro Bouncing or Reversing?
AUD/USD Prices May Consolidate as Downtrend Remains Intact
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--Written by Peter Hanks, Junior Analyst for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.