Is The USD/JPY Rally Ready To Resume?
Blackwell Global | Jun 23, 2017 01:28AM ET
Key Points:
- Bearishness could end within the next week or so
- A breakout above the 100 day EMA is like to signal the resumption of the uptrend
- Gains should be capped around the 113.00 handle
The dollar yen’s resurgence has been moderated over the past few days by the presence of the 100 day EMA but the pair’s underlying bullishness may shine through shortly. Indeed, a number of technical developments are signalling that a breakout above the 100 day average may be seen inside of a week – potentially leading to the upside of the broader pennant being tested.
Firstly, it’s worth taking a look at why last week’s strong uptrend has seemingly run out of steam before addressing why the rally may yet be saved. As shown below, the key culprit in capping upsides has been the 100 day EMA which has proven to be a source of dynamic resistance once again. However, we can’t ignore the influence of the stochastics whose overbought reading has also been putting pressure on the dollar yen. Aside from these technicals, there isn’t actually much suggesting that a reversal is warranted which leaves the bulls in a fairly good position to take back control of the pair moving ahead.
What’s more, there are numerous readings indicating that the bulls are very much on the cusp of pushing past the 100 day EMA and beginning the next leg of the broader uptrend. For one thing, the 12 and 20 day moving averages have seen a crossover – potentially heralding a shift in the medium-term bias for the USD/JPY. Additionally, the Parabolic SAR is well below price action which would typically suggest that the rally remains intact and that we can expect further upsides in the coming days.
As for where we can expect gains to extend to, currently, we forecast that the long-term pennant will remain in play which will likely provide us with our eventual reversal point. This should mean that upsides are limited to around the 113.00 mark even if we see a decent shift in the fundamental bias back to bullish. Nevertheless, do keep half an eye on the newsfeed as any particularly buoyant results could see the rally run its course faster than currently predicted.
Overall, keep an eye on the pair moving ahead as it could be an interesting few sessions. As mentioned, that shifting technical bias should be felt and this could see the bulls emboldened – potentially leading to a rally back to the top of that pennant. The key moment to look for will be a move above the 100 day moving average as this signals that the bears have finally yielded.
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