USD/JPY Forecast: Doors open for rally to 114.00
|The USD/JPY pair rose to 113.19 yesterday as expected and extended gains further to 113.39; the highest level Nov. 14.
Currently, the spot is trading at 113.29 and as per the chart studies, looks set to extend gains to 114.00 levels ahead of the weekend.
4-hour chart
- Inverse head and shoulders breakout.
- 5-MA, 10-MA curled up in favor of the bulls.
- Bullish 50-MA, 100-MA crossover.
- Bullish 5-MA and 200-MA crossover.
- Bullish RSI.
The spot looks set to extend the rally to at least 114.00 levels. The inverse head and shoulders breakout have opened doors for 115.38 (inverse head and shoulders breakout target as per the measured height method). Also, bull flag breakout (confirmed yesterday) could translate into a rally to 114.18.
The pair may have a re-look at levels below the neckline support to shake out the weak bulls.
Daily chart
- Higher lows and higher highs - Sharp rebound from 111.99 (Dec. 6 low) followed by (yesterday's) close above113.09 (Dec. 4 high) has established higher lows and higher highs pattern. It indicates the bulls have regained control.
Monthly chart
- The bullish breakout on the 4-hour chart adds credence to the solid rebound from the rising trend line support seen on the monthly chart above.
- Hence, the pair looks ready to revisit 114.0 - the trendline sloping downwards from the Aug. 2015 high and Dec. 2015 high.
The spot could easily extend gains beyond 114.18 (bull flag breakout target) if the US wage growth numbers beat estimates. On the other hand, a weak data could yield a pullback in the USD/JPY. However, only a close today below 111.99 (Dec. 6 low) would abort the bullish view.
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