USD/JPY Technical Analysis: Bull-Flag Bounce off Trendline Support
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-USD/JPY Technical Strategy: Strength of US Dollar Favors Buying Dips above 121.75/122
-Prior Channel Resistance Turning Into Support
-1-mo. Trendline Also Acting as Key Support
USD/JPY looked to take cues from the tragedy on Friday night in Paris as the market gapped down on the open by ~30 pips. However, the focus soon turned to economic prints in Japan that confirmed fears of a double-dip recession. Those same fears were also aligned with a hope that the stingy BoJ would soon open the floodgates of QQE again, which caused the JPY to weaken against a majority of currencies. Now that the downside of USDJPY has proven itself limited and a dip into prior channel resistance saw USDJPY go bid, attention is now turned to the August and June highs of 125.27 and 125.85 respectively.
JPY had all the traits of a currency that the market anticipated would soon be weakened by its central bank today. The yen went on defensive footing after setting a low in the Asian session open above the 100-dma near 121.75. Key support of 121.75/122 looks set to hold, which favors upside until a daily close below this zone develops. The most recent break higher looks to be a bull flag pattern. The pattern target is above the prior highs near ~126.00. The higher-low bounce to open the week near a confluence of support (marked on the chart below) helps to view today’s burst higher as a sign of things to come. The first sign that we’re well on our way would be a daily close above the opening range high for November at 123.60.
For now, the weekly opening range low of 122.21 will act as support. Much like Oil, USDJPY is working on a bullish key day which means that daily candle prints a low below the prior day’s low, yet closes above the prior day’s high. A Bullish Key Day denotes strength and encourages us to look beyond short-term resistance of 123.71 (the equal-wave move off the August 24th low from the October 15th low) and 124.03 (Weekly R2 Pivot). USDJPY is traveling higher in a bullish channel, and as long as price remains within the confines of the blue channel that starts with the October 15th low, we will keep looking higher for USDJPY. T.Y.
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