Key Points:
- Recent downtrend could be about to end.
- 100 day EMA continues to push the pair higher.
- Rally could see the 115 handle challenged again.
The Dollar-Yen looks like it is on a cruise course to break free of its medium-term downtrend in the near future. Specifically, the pair is fast running out of room to consolidate unless it finally crosses back below the 100 day moving average. However, given a number of other technical readings, resistance is looking significantly weaker than support at this point.
First and foremost, it’s important to take a look at that declining trend line a little more closely. Notably, it has proven rather resistant to attempts to push higher recently which would generally, and quite rightly, suggest that a reversal is now on the way. However, unlike previous attempts at breaking the trend, we don’t have much in the way of resistance other than the trend line itself.
Whilst it is true that the 28.6% Fibonacci retracement will be capping upsides somewhat, this is about the only additional source of resistance currently present on the daily chart. Specifically, the RSI and Stochastics are both neutral which leaves the pair with plenty of gains to claim before risking moving into overbought territory.
Conversely, support is highly robust and this should force the USDJPY to move higher as its consolidation phase comes to an end. As is made clear above, the 100 day EMA continues to be a source of dynamic resistance and we can even see a loose double bottom forming up. Moreover, the current zone of support around the 111.59 mark has been a local trough three times in as many months.
Setting these readings aside, the price action seen since the Dollar-Yen began its decline would typically result in a breakout to the upside eventually. More precisely, a falling wedge is becoming quite obvious now and its end is nearly in sight. As a result, the air could move as high as the 115.00 mark within the next few sessions.
Ultimately, we will just have to wait and see if the pair can muster the strength to reverse its recent downtrend. However, as discussed above, the technicals definitely seem to suggest that we can see that trend line broken. Although, as always, keep an eye on the fundamental side of things which could upset the forecast, especially as we assess the aftermath of Trump’s address.
