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

To receive Ilya's analysis directly via email, please SIGN UP HERE

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.

Add these technical levels directly to your charts with our Support/Resistance Wizard app!