USD/JPY surged yesterday, breaking above the resistance (now turned into support) barrier of 107.37. Then, it hit resistance at 107.88 and retreated to hit support at 107.52. Today, the rate rebounded somewhat again. Overall, the pair has started printing higher highs and higher lows above an upside line drawn from the low of June 23rd, something that paints a relatively positive short-term picture.
If the bulls are strong enough to overcome yesterday’s high of 107.88, we may see them aiming for the 108.25 area, which is marked as a resistance by an intraday swing high formed on June 9th, as well as by the inside swing low of the day before. The rate may stall around there, or even retrace slightly. However, as long as it would stay above the aforementioned upside line, we would see decent chances for another leg north. This time, a break above 108.25 could occur, opening the way towards the inside swing low of June 4th, at around 108.60.
Shifting attention to our short-term oscillators, we see that the RSI is above 50, but it is moving in a sideways manner slightly below 70. The MACD, although above both its zero and trigger lines, shows signs of flattening as well. Both indicators suggest a slowdown in the upside momentum, which enhances our choice to wait for a break above 107.88 before we get confident on larger bullish extensions.
On the downside, we prefer to wait for a dip below 107.37 before we start examining a bearish reversal. Such a move may place the rate below the short-term upside line and may initially set the stage for yesterday’s low, at 107.04. Another break, below 107.04, may extend the decline towards Friday’s low, at 106.80.
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