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USD/JPY Forecast: This Week's Close Is Pivotal

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Weekly Chart

usd_jpy_53-636711212915951464.png

Candlestick pattern: Bullish outside-week

RSI: Bullish above 50.00

As seen in the chart above, the USD/JPY pair created a bullish outside-week candle last week, signaling the pullback from the July high of 113.18 has ended.

A bull reversal would be confirmed if the pair closes above the last week's high of 111.49. This scenario looks likely as the pair's defense of the support at 109.91 - 38.2 percent Fib R of 104.57/113.18 - and also the long-term falling trendline (draw from the Aug. 2015 high and Dec. 2015 high) last week could have emboldened the bulls.

What's more, the 50-week moving average (MA) is located above the 100-week MA, signaling the path of lease resistance is to the upside.

The only cause for concern is the head-and-shoulders breakdown seen in the 10-year US-Japan bond yield spread, which indicates the yield differential is set to narrow in the near future in the USD-negative manner.

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Technically speaking, the pair could attack and possibly break above the July high of 113.18 if Friday's close is above 111.49.

On the downside, acceptance below the previous week's low of 109.77 would add credence to the H&S breakdown on the yield differential and could yield a deeper pullback to 107.89 (61.8 percent Fib R of 104.57/113.18).

 

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Posted-In: FXStreetNews Forex Markets

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