USD/JPY Forecast: Bullish bias intact

Omkar Godbole FXStreet Contributor

The USD/JPY's bounce from the ascending (bullish biased) 5-day moving average (MA) despite the flattening treasury yield curve indicates the tide has turned in favor of the bulls.

The spread or the difference between the US 10-year yield and the 2-year yield narrowed to 53 basis points earlier today - the lowest level since October 2007. The relentless flattening of the curve hurt the US dollar over the last one year.

However, it seems the greenback is no longer taking cues from the yield curve. It also indicates the bears may have done selling the greenback. So, the pair will likely test and possibly break above the 108.00 mark in the next couple of days.

Daily chart

The pair continues to form higher lows: 104.63 (March 26 low), 105.66 (April 2 low), 106.62 (April 10 low) and 106.88 (April 17 low)

The momentum studies are biased bullish: 5, 10, 21-day MA is trending north, indicating short-term bullish setup. The relative strength index (RSI) holds above 50.00 and on the rise.

Further, a big rounding bottom pattern is sighted in the 4-hour chart. A bullish 5MA and 10MA crossover is seen in the weekly chart. Clearly, things are looking good for the USD bulls. So, the pair could rally to 108.43 (descending/bearish biased 5-month MA).

That said, a daily close below 107.62 (April 10 low) would put the bears back into the driver's seat.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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