Clinging to modest intraday gains around the 113.65-70 zone

• USD / JPY recorded a modest intraday bounce from the support of the ascending channel on Monday.
• The setup favors the bulls and supports the prospects for a resumption of the previous uptrend.
• A convincing break below the trend channel support would negate the positive outlook.

The pair USD/JPY it attracted some buying on the first day of a new trading week and, for now, it appears to have stalled its recent corrective pullback from multi-year highs. The pair maintained its modest intraday gains, around the 113.65-70 region during the middle of the European session, although it lacked tracking.

The dominant risk appetite undermined the safe haven Japanese yen and was seen as a key factor that acted as a tailwind for the USD / JPY pair. The bulls were also inspired by soaring US Treasury yields, which revived demand for the US dollar and helped the pair defend the lower end of a short-term rising channel.

The mentioned support coincides with the 23.6% Fibonacci level of the recent strong upward move of 109.12-114.70 and should now act as a key point for short-term traders. A sustained break below will suggest that the USD / JPY pair has already broken through and will pave the way for a deeper corrective pullback in the near term.

Meanwhile, the technical indicators on the daily chart have relaxed from overbought territory and are still comfortably held in bullish territory. This, coupled with the emergence of buying on dips near the trend channel support, favors bull traders and supports prospects for a resumption of the well-established previous uptrend.

Therefore, a further move past the 114.40 intermediate hurdle, to retest the recent highs near the 114.70 region, remains a clear possibility. Momentum could extend towards the key psychological 115.00 level, above which the bulls could aim to challenge the trend channel hurdle, around the 115.30-35 region.

Conversely, a sustained break below trend channel support could trigger aggressive technical selling and make USD / JPY vulnerable to further weakening below 113.00. The next relevant support is pegged near the 112.70-65 region (38.2% of the Fibonacci level) before the pair finally drops to test the round 112.00 figure.

Daily chart

Technical levels