Remains trapped within a range below multi-month highs prior to the BoJ

  • USD / JPY remains trapped within a range since the beginning of this week.
  • The formation of a rectangle marks a brief pause in the recent uptrend.
  • Investors now await the Bank of Japan’s monetary policy decision before positioning themselves for the next move.

The USD / JPY pair moves with a slight positive bias during the European session on Thursday, remaining slightly positive on the day around the 109.00 level.

However, the rally has not had a solid continuation and the pair has so far remained below the multi-month highs set earlier this week. Investors now seem reluctant to open aggressive positions, preferring to wait on the sidelines before the BoJ’s monetary policy decision on Friday.

From a technical perspective, the pair has been trapped within a range since the beginning of this week. Price action within the range constitutes the formation of a rectangle on the short-term charts, which is a continuation pattern that marks a brief pause in the trend.

Given the recent strong rally of over 650 pips from the January 2021 lows, this could be categorized as a consolidation phase amid overbought conditions. However, the USD / JPY pair appears poised to prolong its bullish move and continue to move higher in the near term.

With that said, it will still be prudent to wait for a sustained break above the resistance of the trading range, around the 109.25-30 region, before positioning for the next move to the upside. The USD / JPY pair could accelerate the move towards the recovery of the key psychological level of 110.00.

On the other hand, any significant drop is likely to be seen as a buying opportunity near the 108.80-75 region. This last level marks the lower limit of the weekly range established earlier this Thursday. Should it break down decisively it could lead to a profit pickup in the pair.

A bit of continuation below the 108.30 region will reaffirm that the USD / JPY has peaked in the near term and will accelerate the slide towards the 108.00 level. The corrective pullback could extend towards the round 107.00 level with some intermediate support near the 107.30 area.

USD / JPY 1 hour chart

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USD / JPY technical levels

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