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USD/JPY Technical Analysis: Key Trend Line Back in Focus

USD/JPY Technical Analysis: Key Trend Line Back in Focus

Ilya Spivak, Head Strategist, APAC

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Talking Points:

  • USD/JPY Technical Strategy: Flat
  • Prices Recover to Target Trend-Defining Trend Line Resistance
  • Waiting for Directional Clarity to Emerge Before Taking a Trade

The US Dollar continues to correct higher against the Japanese Yen after prices found support above the 116.00 figure. Buyers are now poised to retest the underside of a trend-defining trend line that guided the pair higher through much of 2015 until a bearish breakout seemingly tipped the scales in the opposite direction earlier this week.

Trend line support-turned-resistance is reinforced by the 61.8% Fibonacci retracement at 121.76. Breaking above this barrier on a daily closing basis exposes the 76.4% level at 123.10 as the next threshold of significance. Alternatively, a reversal back below the 50% Fib at 120.67 targets the 38.2% retracement at 119.59.

The dominant multi-year USDJPY trend pints upward, suggesting the latest downswing was corrective. With that in mind, it is unclear whether the upswing of the past three days represents a true return to the long-term trajectory or a retracement within the context of a more prolonged near-term decline. Prices’ behavior at the trend line may clarify matters and we will opt to stand aside for now, monitoring positioning for an actionable trade setup to emerge.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.