USDJPY retains medium-term neutral outlook, short-term bullish phase intact

USDJPY remains neutral in the medium term and has been trading in a broad range between 108 and 114 over the past 6 months. The near-term bullish phase that started last week from near solid support in the 108-area is still in place.

Momentum indicators are providing bullish signals, as the RSI has crossed above 50 and the MACD above zero. Ichimoku cloud analysis shows the market has risen above the cloud, while the Tenkan-sen line has crossed above the Kijun-sen line, giving a bullish signal.

The bounce off the September 8 low of 107.31 is still in progress. The short-term bias is strongly bullish after USDJPY rose above the 200-day MA to hit a high of 112.64 so far. There is scope for another push higher towards the top of the range at 114. Breaking above the July 11 high of 114.49 would allow the uptrend to extend further to target the next major peak at 115.50. From here the market would shift its neutral medium-term bias to a bullish one.

Failure to rise above resistance at 114 could see USDJPY reverse back down towards the lower end of the range. Immediate support is at the top of the cloud at 111.60. A drop into the cloud would change the short-term bullish technical tone and focus would turn to the 108-support area. Should this solid support level be broken, USDJPY would move out of the 6-month range and the medium-term picture would turn from neutral to bearish.

In the short term, there is limited risk to the downside but the medium-term outlook remains neutral within the established 6-month range between 108 and 114.