The USD/JPY rally is in its nascent stages and the pair could rise well above 120.00 in the next 12 months, the robust structure on the monthly chart indicates.
As of writing, the currency pair is trading at 113.58 - the highest level since November 2017 - having found acceptance above the 200-week moving average of 113.20.
Technically speaking, the rally seen this month has likely set the tone for a completion of the long-term inverse head-and-shoulders bullish reversal pattern.
Monthly chart: USD/JPY and 10-year treasury yield
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The pennant breakout seen in the USD/JPY monthly chart indicates a resumption of the rally from the September 2012 low of 77.13. The bull pattern also adds credence to the golden cross -a bullish crossover between the 50-month and 200-month moving averages (MAs) - confirmed two years ago.
What's more, the relative strength index, is biased toward the bulls and the 5-month and 10-month MAs are trending north, indicating a bullish setup.
And last but not the least, the 10-year treasury yield has likely carved out a long-term bearish-to-bullish trend change, as indicated by the inverse head-and-shoulders breakout.
Hence, it seems safe to say that the pair could rise toward the large inverse head-and-shoulders neckline resistance, currently located around 126.50, in the next 12 months.
The bullish outlook would be invalidated if the pair finds acceptance below the previous month's low of 109.76.
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