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Bulls take control above 106.00, move above monthly highs

  • USD / JPY continued to gain ground for the third straight session on Thursday.
  • The formation of an ascending channel supports the prospects for additional earnings.
  • The bulls appear poised to challenge the resistance of the channel near the 106.70-75 region.

The pair USD/JPY It capitalized on this week’s strong rebound from levels below 105.00 and gained traction for the third straight session on Thursday. The pair jumped back above 106.00 and was last seen trading near the monthly highs.

US Treasury yields continued to rise following the release of mostly upbeat US macroeconomic data and continued to support the strong offered tone surrounding the USD / JPY pair. However, a widespread weakness in the US dollar prevented the bulls from making new bets and limiting gains.

From a technical perspective, the pair has been trending up along an upward sloping channel for the last two months or so. The formation points to a well-established short-term uptrend and supports the prospects for a further appreciation move amid fading safe-haven demand.

The constructive outlook is reinforced by the bullish technical indicators on the daily chart. A subsequent strength above 106.20-25 (monthly highs hit Feb. 17) will reaffirm the uptrend and set the stage for additional short-term gains.

The USD / JPY pair could then aim to challenge the trend channel hurdle, currently near 106.70-75. Some subsequent purchases will be seen as a new trigger for bull traders and will push the pair above 107.00, towards the next resistance near 107.50.

On the other hand, the 106.00 level now appears to protect the immediate drop. This is followed by the very important 200-day SMA, currently around the 105.40 zone before the trend channel support near the key psychological level 105.00.

Failure to defend the above support levels will nullify the short-term bullish bias and cause some aggressive technical selling. The next drop has the potential to drag the USD / JPY further below the monthly low support, around the 104.40 zone.

Daily chart

Technical Levels

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