Updates the highs of several months before Powell’s statements, looking at 107.50

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  • USD / JPY continued to climb higher on Thursday and soared to nearly seven-month highs.
  • Momentum confirmed a further bullish breakout through an ascending channel.
  • The slightly overbought RSI on the daily chart warrants some caution for bullish traders.

The pair USD/JPY It maintained its strong offered tone during the middle of the European session and was last seen near the 107.35 region, or the highest level since July 2020.

Sustained buying of US dollars, despite a softer tone around US Treasury yields, was seen as one of the key factors driving the USD / JPY higher. The bulls did not appear to be affected by a modest pullback in equity markets, which tends to prop up demand for the Japanese yen as a safe haven.

From a technical perspective, the momentum pushed the USD / JPY pair past a resistance marked by the upper bound of an ascending channel of more than two months. This could be seen as a new trigger for bull traders and could have set the stage for an extension of the ongoing positive move.

That said, the RSI (14) on the daily chart has moved above the 70 mark and is pointing to mild overbought conditions. This, in turn, warrants some caution before positioning for any further appreciation moves ahead of Fed Chairman Jerome Powell’s scheduled speech later during the North American session.

However, the USD / JPY pair appears poised to extend the strong momentum beyond the 107.60 congestion zone and aim to regain the 108.00 level for the first time since July 2020.

On the other hand, any pullback could now find some support near the trend channel resistance break point before 107.00. Further weakness could be seen as a buying opportunity and remain limited near the 106.70-65 horizontal zone, which should now act as a solid foundation for the USD / JPY pair.

Only a sustained break below will negate the constructive short-term outlook. The USD / JPY pair could then accelerate the corrective decline towards the 106.00 level en route to the 105.50 confluence support, which comprises the very important 200 day SMA and the lower limit of the mentioned channel.

Daily chart

Technical levels

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