The USD/JPY pair has been trading in a symmetrical triangle formation since the beginning of December 2014, following the aggressive buy above the 110.00 in late October 2014. Furthermore, the pair remains stuck in a range the last couple of weeks or so, between the key support zone of 117.18 – 117.25 and the strong resistance level at 118.65.
Technically speaking, the 4-hour chart certainly suggests we could see some bearish movements over the next few days, while the daily chart highlights a general lack of direction at the moment. Remaining on the 4-hour chart, the dollar is still struggling to break above the short-term descending trend line, where the 200-period simple moving average and the 118.00 level, combined to provide significant resistance to the pair.
On the downside, the pair is finding strong support at the 117.25 level. A dip lower from here, would trigger some stops and could open the door for further pressure on the key support level at 116.50. From there, I would expect the bulls to give their fight and if they manage to win the battle, then they could push the price higher towards the 117.10 for a retest. However, I would expect the price to retest the lower boundary of the triangle formation before it exits the formation.
Moreover, we are approaching the apex of the triangle formation and a breakout is expected anytime soon. Ordinarily, this comes around two-thirds of the way into the triangle which would mean a breakout is already overdue and therefore we should watch this closely.
Otherwise, if we see a move higher, based on how these setups usually behave, I would be inclined to believe that the odds of a breakout to the upside would be increased, prompting a more aggressive move towards the upper boundary of the triangle formation and the 122.00 level.
Both the MACD and the Stochastic lie near their neutral levels confirming the validity of the formation, while the stochastic is moving near the 50 level, reaffirming the disagreement between investors.
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