USD/JPY traded higher on Friday, breaking above the 107.90 zone, which provided decent resistance on Wednesday and Thursday. The latest recovery started after the rate hit support near the 107.00 zone, with the pair now trading above all three of our moving averages on the 4-hour chart. Having all these in mind, we will hold a cautiously-bullish stance for now.
In our view, the move above 107.90 may have opened the door towards the 108.45 zone, which is near the peak of September 18th. That said, we would like to see a decisive move above that high before we get confident on larger bullish extensions. Such a move would confirm a forthcoming higher high and may encourage the buyers to drive the battle towards the high of August 1st, at around 109.30.
Taking a look at our short-term oscillators, we see that the RSI lies above 50, pointing up, while the MACD stands fractionally above both its zero and trigger lines, and points north as well. These indicators detect positive momentum and support the notion for some further short-term advances, at least towards the 108.45 zone.
On the downside, we would like to see a clear dip below 107.00 before we start examining whether the bears have gained the upper hand, at least in the near-term. This would confirm a forthcoming lower low on the 4-hour chart and may initially see scope for declines towards the 106.65 area, near the low of September 6th. Another dip, below 106.65, may carry more bearish implications, perhaps allowing the bears to push towards the 106.10 zone, near an intraday swing low formed on September 4th.
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