USDJPY is heading north towards the more-than-five-year high of 118.45 and any advances beyond this top would endorse the long-term bullish outlook. The pair penetrated the ascending channel to the upside; however, the technical indicators are suggesting an overbought market. The RSI is flattening above the 70 region, while the stochastic is turning lower in the overstretched region.
Should the pair manage to strengthen its positive momentum, the next resistance could come around the 124.00 psychological mark, taken from the high in November 2015. A break above it would shift the bias to a more bullish one and open the way towards the 125.40 resistance, registered in August 2015.
However, if prices are unable to break the multi-year high the risk would shift to the downside, with the 116.35 support coming into focus. A drop below the short-term simple moving averages (SMAs) would signal a bearish correction towards 114.15 and 113.40.
All in all, USDJPY has been in a strong upside rally over the last few days and only a decline below the 20- and 40-day SMAs may change the short-term bias to neutral.
