USDJPY – Two Weeks of Bullish ActivityBy Adam | Monday, December 12th, 2016
The Japanese economy had gone through a mixed news atmosphere this past week making it plunge just as much as it climbed. However, the bulls have won the fight on this one, with the last month of trading seeing the pair make a 10.4% gain.
The pair reached a new high on 5th December by touching 114.80 before retracting lower but the relaxation in bullish pressure did not go further than 113.45 (Dec 08). A strengthening dollar is the most apparent reason for that as traders now look at the USD as a safe haven compared to both the Yen and the Euro, of which the ECB decided to announce more Quantitative Easing on the Eurozone.
USDJPY Technical levels
The 200MA is on a climbing lane on both the H4 and H1 and has since proved to be a reliable spot for bounces to occur. The level was breached by a hairpin on 8th December but this just proved to be a picture perfect reversal of the pattern that occurred on 5th December before the decline.
The price action is widely expected to remain above the 200MA and the 113.26 support level (the price reached before the news about the ECB’s QE announcements. The bearish move early this week can be viewed as a spell of profit taking by traders to reload longs while taking advantage of the dollar uncertainty that grew as the Fed prepared to make policy rate decisions.
The pair is already 50 points above its Friday open of 113.75 just an extra sign that more bullish action will be seen into the coming week, albeit a high possibility of a little bullish relaxation before challenging higher levels.
The current top at 114.80 also coincides with the March – April 2016 highs. Once broken, the next crucial top is at 117.55. That resistance level was last seen in February 2016 before the pair started making a multi-month decline.
The pair is expected to make new highs over the next week, with the main news affecting the dollar being the widely expected US Federal Reserve announcements on the policy rates. The technical and volatility however favours the bulls even as the US goes into a crucial trading week.
Image Source: MetaTrader 4 with custom mt4 indicator
USDJPY Trade Ideas
To the downside, traders can expect the 114.00 psychological support to hold strong even if prices drop below the current levels. It may bring some sideways trading before the actual support of 113.26 is tested in the coming week.
Traders should however be looking for long positions in light of the current bullish strength. There is no clear sign yet that the bullish move will relax soon. The positioning of the 55MA and the 200MA on the chart shows signs of widening and both MAs have slightly angled upwards.
The indicator attached also shows a strengthening bullish activity even on the short term, with the daily and weekly candles both green. Traders can place longs anywhere above 114.05 and target 114.76 and above.Published in News & Analysis