Rising to one-week highs, bulls expect a move above the 200-day SMA

• USD / JPY gained strong continuation traction on the first day of a new week.
• The technical setup favors the bulls and supports the prospects for a move above the 200-day SMA.
• Only a sustained break below the 104.40 region will negate the short-term bullish bias.

The USD / JPY pair has extended its strong intraday gains and has jumped to fresh one-week highs, around the 105.40 region, during the first half of the European session. The prevailing environment of risk appetite has weighed on the safe-haven Japanese yen and has been seen as a key driver of the pair.

The USD / JPY pair has now risen again near the very important 200-day SMA, which coincides with the resistance of a downtrend line for almost a year. A sustained breakout will be seen as a new trigger for the bulls and will pave the way for a new move to the upside in the short term.

Meanwhile, the technical indicators on the daily chart have maintained their bullish bias and are still far from being in overbought territory. This adds credibility to the constructive outlook and supports the prospects for a movement beyond the aforementioned confluence barrier.

Some subsequent purchases above the monthly highs, around the 105.75 region, will reaffirm the bullish bias and push the USD / JPY pair beyond the 106.00 level. So the bulls could aim to test the next relevant resistance marked by the highs of September 2020, around the 106.45-55 region.

On the other hand, the key psychological level of 105.00 now becomes an immediate strong support to defend. Any drop could still be seen as a buying opportunity and remain limited. Only a subsequent drop below last week’s lows, around the 104.40 region, will negate the positive outlook.

USD / JPY daily chart