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USD/JPY Technical Analysis: The Breakout Many Have Been Waiting For

USD/JPY Technical Analysis: The Breakout Many Have Been Waiting For

Tyler Yell, CMT, Currency Strategist

Talking Points:

USD/JPY has been working on a price breakout over the last handful of trading days since the opening range of February closed, and Tuesday’s price action looks to have confirmed what many USD/JPY Bulls have been wanting. On Yellen’s testimony to US Congress, Yellen noted that it would be “unwise,” for the Fed to delay too long in raising rates. This comment caused front-end Treasury yields, which we explained in the previous USD/JPY post are highly correlated to USD/JPY to move higher.

Fundamental focused traders should notethat with the correlation of USD/JPY to yields that there remains a lot of uncertainty about whether or not yields can persistently push higher as some are predicting. In Yellen’s testimony on Tuesday, she even said that the uncertainty about which fiscal policies will be employed under the new administration make it very difficult for her to change her forecast and therefore, it will be difficult for the bond market to adjust theirs credibly.

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The move higher in USD/JPY also took out many levels of resistance that we’ve been watching to keep a bearish bias. Therefore, I have moved from bearish to neutral on USD/JPY. The support in focus now will be the 61.8% retracement of the initial leg higher from 111.59-114.17 at 112.60. A hold above this level with aggressive trend advancements would favor that a move higher is in the works and could continue or at least is not worth fighting.

Looking at the chart below, you can see a highlighted range above the bearish channel drawn with Andrew’s Pitchfork as well as the price above Ichimoku Cloud. The highlighted range comprises of the 38.2-61.8% retracement of the 2017 range of 118.62-111.594. A break above this zone would turn my bias from Neutral to Bullish.

The base of the Fibonacci zone sits at 114.849, which is anticipated to bring the first real test of this young USD/JPY bull move. The top of the Ichimoku cloud aligns with the top of the 61.8% retracement that would favor a further trend continuation should a breakout occur.

H4 USD/JPY Chart: USD/JPY Breaks Above Counter-Trend Bearish Channel & H4 Ichimoku Cloud

Chart Created by Tyler Yell, CMT


Shorter-Term USD/JPY Technical Levels: February 14, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

Contact and discuss markets with Tyler on Twitter: @ForexYell

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