- USD / JPY extends its recent positive move and gains traction for the third day in a row.
- The formation of a bullish pennant on the daily chart supports the prospects for additional earnings.
- Only a sustained break below the 109.40-35 region will negate the positive bias in the short term.
The USD / JPY pair moves higher for the third day in a row on Tuesday and rises to a week-and-a-half high around the 110.15 region during the first half of the European session.
The USD / JPY pair remains close to resistance marked by a downtrend line, which extends from the yearly highs hit in March. This, along with another rising trend line, constitutes the formation of a symmetrical triangle on the daily chart.
Given the strong positive movement from the yearly lows, down from the 103.00 level touched in January, the aforementioned triangle could be classified as a bullish continuation pennant pattern. A sustained move to the upside will set the stage for an extension of the bullish move in the short term.
The constructive setup is reinforced by the fact that the oscillators on the daily chart have just started to gain positive traction. A subsequent move above the monthly highs, around the 110.30-35 region, will reaffirm the bullish breakout and could spark some technical buying.
The USD / JPY pair could then aspire to retest the yearly highs, around the 111.00 region. Momentum could further extend towards the next relevant hurdle near the 111.50-55 region, although the bulls could be reluctant to open aggressive positions ahead of the FOMC.
On the other hand, the horizontal zone of 109.70-65 now appears to defend the immediate fall ahead of the triangle support, currently near the 109.40-35 region. Sustained weakness will negate any short-term positive bias and make USD / JPY vulnerable.
The next relevant support is near the round level of 109.00, below which the USD / JPY pair could extend the corrective decline towards the 108.70-60 support zone.
USD / JPY daily chart
USD / JPY technical levels
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