USD/JPY traded sharply higher yesterday, breaking above the 111.68 barrier and confirming a forthcoming higher high. Then the rate hit resistance at 112.05 and started consolidating slightly below that barrier. Overall, USD/JPY has been in a rally mode since September 22nd, as marked by a steep upside support line drawn from the low of that day. So, with that in mind, we will consider the short-term picture to be positive.
A break above 112.05 will confirm another higher high and may pave the way towards the 112.40 level, marked as a resistance by the high of April 24th, 2019. If the bulls decide to take the action above that barrier, the next are to consider as a resistance may be at 112.85, marked by the high of December 18th, 2018.
Looking at our short-term oscillators, we see that the RSI, already above 70, turned up again from near the 70 mark, while the MACD, already at extremely positive levels, remains slightly above its trigger line. However, the MACD shows signs that it could top at some point soon. Both indicators detect strong upside speed, but the flattening of the MACD makes us careful over a possible setback before the next leg north, perhaps for a test at the steep upside support line.
In order to abandon the bullish case, we would like to see a dip below 111.68. This could also signal the break of the steep upside line and may encourage declines towards the 111.20 barrier, marked by yesterday’s low. If that low doesn’t hold, we may experience extensions towards the 110.80 territory, defined as a support by the inside swing highs of August 11th and September 27th.
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