USD/JPY Forecast: Falling Channel Breached, But Follow Through Is Weak

The USD/JPY pair is better bid today, but it is struggling to get past the 5-day MA level of 113.70. As discussed here, the unwinding of the treasury yield curve flattening trades could have lifted the US 10-year yield to 2.4 percent, thus the pair followed suit.

However, the yield is showing no signs of life today. The data calendar is light, hence the spot is the mercy of the broader market sentiment and a US yield curve.

Technicals studies say the weak follow through to a bullish breakout on the intraday charts is bad news.

1-hour chart

• Despite the inverse head and shoulders breakout, a bullish falling channel breakout and a bullish RSI, the spot is struggling to break above the 1-hour 100-MA.
• The 1-hour 50-MA still descending (favors downside in the spot).

4-hour chart

• A convincing move above 114.00 (resistance of ascending trendline) would push the RSI into bullish territory and shall open doors for re-test of 114.45 (Oct. 27 high). Still, caution is advised as the area above 114.00 has proved to a tough nut to crack.

On a larger scheme of things, multiple day-end closes above 114.10 (resistance of trendline sloping downwards from the Aug. 2015 high and Dec. 2015 high) are required for a convincing move towards 115.50-116.00 levels.