Breaks a 24-year downtrend line and hovers around 118.00

• USD/JPY is trading above a 24-year resistance trend line.
• Market risk appetite weighed on safe haven pairs, although rising US Treasury yields dragged USD/JPY higher.
• USD/JPY Technical Outlook: Bias bullish, though a pullback to Jan 4 cycle low at 116.35 is anticipated.

The USD/JPY extends last Friday’s rally, above a 24-year downtrend line broken on Friday, when USD/JPY closed at 117.27, and rising US Treasury yields underpin the pair. At the time of writing, the USD/JPY is trading at 117.99.

The mood in financial markets remains fragile, as illustrated by European stocks ending higher, in contrast to the US, where all major indices are in the red except for the Dow Jones. Meanwhile, the US Dollar Index, a gauge measuring the dollar against a basket of its rivals, fell from the 99.00 level, down 0.28%, to settle at 98.85. Meanwhile, the US 10-year Treasury bond yield rose 11 basis points to 2,121% as traders brace for the US central bank’s first rate hike.

Overnight, USD/JPY rose steadily towards 118.00, opening near session lows at 117.28. It then continued to rise, stopping at 118.00 as the bulls took a breather and prepared an assault on the January 2017 cycle high around 118.61.

USD/JPY Price Forecast: Technical Outlook

USD/JPY remains biased to the upside. Once the triple bottom target was met I might have expected a reversal move towards the Jan 4 high at 116.35. However, as the US central bank is about to hike rates on Wednesday, coupled with the market mood, it buoyed the dollar.

With that being said, the first resistance level for the USD/JPY would be the 118.00 level. A break of the latter would expose the January 2017 high at 118.61, followed by 119.00 and 120.00.

Additional technical levels