The USDJPY could be about to start a significant rally toward 138.00 in the coming weeks.
We’ve already seen a nice move from 130.70, a key level I’ve discussed several times recently.
We even saw USDJPY carve a bullish pin bar on the 24th.
There are two things I’m currently watching to signal further USDJPY strength.
The first is a US Dollar Index (DXY) reclaim of 102.50.
We’ve seen the DXY struggle since testing the 105.60 area on March 8th.
The dollar index is also holding below the 103.50 yearly open.
So while we may see dollar strength in the coming weeks, bulls have their work cut out to break the downtrend.
And although most associate the DXY as inversely correlated to EURUSD, the positive relationship with USDJPY is just as significant.
We’ve witnessed relative strength from USDJPY as the DXY has trended lower, but it’ll likely require a bullish breakout from the dollar index to send USDJPY significantly higher.
The second critical factor in potentially sending USDJPY higher in April is a daily close above 132.90.
We saw the pair reclaim the lower portion of this key area on Wednesday and Thursday at 132.65, but a close above 132.90 is imperative.
A daily close above 132.90 clears the way for 134.40 and potentially higher next month.
So those are the two triggers I’m watching for further USDJPY upside in April.
Of course, there’s a chance none of the above materializes, and both charts break down.
If that occurs and we see USDJPY close a day below 130.70, it would open up downside targets like 128.00.
The chart below is appealing for a move higher, but only if the triggers above are met.
Invalidation would be a higher time frame close below 130.70.
