USD/JPY traded somewhat higher on Thursday, after it hit support fractionally above the upside line drawn from the low of the 3rd of January, the day after the “flash crash”. That said, the rate seems to be finding a ceiling near the 109.90 and 110.20 levels, between which the 200-EMA lies. Therefore, although technically the picture looks somewhat positive, we prefer to wait for a break above 110.20 before we get confident on further upside extensions.
Such a break would confirm a forthcoming higher high on the 4-hour chart and may encourage the bulls to add to their positions, something that may set the stage for the 111.40 area, defined by the high of the 26th of December. If that zone fails to halt the price from drifting further north, then we may see the bulls putting the 112.15 zone on their radars.
Shifting attention to our short-term oscillators, we see that the RSI rebounded from slightly above its 50 line and now looks to be heading towards 70. The MACD lies within its positive territory, but marginally below its trigger line. Both indicators detect positive momentum, but the fact that the MACD is still below its trigger enhances our choice to wait for a decisive move above 110.20.
On the downside, we would like to see a clear dip below 109.10 before we start examining the case of a short-term reversal to the downside. Such a move could confirm the break of the aforementioned upside line and may initially pave the way for the 108.65 barrier, near the low of the 17th of January. Another break, below 108.65, may extend the slide towards our next potential area of support, at around 108.00, or even near 107.80, where the low of the 10th of January is.
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