USD/JPY traded higher on Monday after it hit support near the 112.25 barrier, marked by the low of last Thursday. It looks like the pair is forming a double bottom pattern above the upside support line drawn from the low of the 29th of May, but before we get confident on further advances, we would like to see a clear break above 112.90.
Such a break is likely to confirm the completion of the double bottom and could initially open the way for the 113.20 level, which is slightly below the peak of the 5th of December, also marked by the inside swing low of the 29th of November. Another break above 113.20 could see scope for extensions towards the 113.45 area.
Shifting attention to our short-term momentum studies, we see that the RSI rebounded from its respective upside support line and now looks to be heading towards 50. The MACD, although negative, has bottomed and just crossed above its trigger line. These indicators support the case for the rate to continue recovering, but as we already noted, we prefer to wait for a clear break above 112.90.
On the downside, we would like to see a decisive dip below 112.25 before we start examining whether the bears have taken the driver’s seat. Such a break would confirm a forthcoming lower low on the 4-hour chart and could also signal the downside break of the aforementioned upside support line. If this is the case, the bears may initially aim for the 112.00 hurdle, the break of which could open the path towards the 111.75 zone.
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