USDJPY continues to trade within a broad range between 108 and 114 since April. The short-term bias is to the upside and daily momentum signals remain bullish. MACD is above zero and rising and RSI is above 50, although the indicator has flattened out, suggesting that upside momentum has weakened. USDJPY may be entering a consolidation phase in the near term.
Daily Ichimoku cloud analysis shows that risk is skewed to the upside and bullish signals were given when USDJPY rose above the cloud and over the Tenkan-sen line. This line is now acting as support at 112.34. Should this level hold, then prices may progress towards the upper end of the broader range at the key 114 level. A break of the 114.49 high will confirm the bullish case and open the way towards 115.55 and 118.66. Another extension higher would see a resumption of the longer-term uptrend that started from a year ago when prices rose off the 100 area.
A drop below current support at the Tenkan-sen line would target the top of the cloud at 111.52. Entering the cloud would shift the short-term bias to bearish to target the bottom of the range at 108 and then 107.31 (September 8 low). A drop out of the range would bring more weakness in the market and turn the focus to the downside. The first target would be the October 2016 high at 105.52 and then from here, the odds increase for a move towards the psychological 100-level.
The short-term bias is bullish but turning neutral as there are diminished odds for further USDJPY strength due to the flat RSI. The medium-term neutral market structure remains intact.
