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Price action on USD/JPY has been choppy of late, although yesterday’s break higher could pave the way for further gains.
Hawkish FOMC minutes and trade tensions helped break the recent bout of USD weakness, before NAFTA optimism and firmer employment provided it another boost yesterday. Assuming we don’t get a dovish surprise from Powell later today, USD/JPY could be a strong contender for longs next week.
After drifting lower for the past month, support has been found at 109.77 where a morning star reversal pattern has since formed (bullish reversal). Given the strong close yesterday was its most bullish in three weeks, the break of a retracement line and respect of a 20-day average, it’s possible a key structural low has been seen at 109.77.
On the weekly chart we can better see its reversal of fortunes, having failed to hold beneath last week’s low before attacking the high. Furthermore, as this week’s low has respected a 38.2% Fibonacci level and 20-week average it further reinforces the structural low at 109.77. So, if bullish momentum can resume then a run to 1.13 is not out of the question.
That said, prices have currently found resistance near last week’s high (near May’s high) which leaves potential for a retracement from current levels. And as Powell’s Jackson Hole speech is up later today, there’s the potential for whipsaws around current levels if something unexpected is to be said. But, with so many supporting factors above 109.77 for the bull-camp, we’re flagging this as one to watch over the coming week for bullish setups, assuming the current structure holds.
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