Can the USDJPY rally another 350 pips from today’s price?
What resistance levels could prevent such a move?
Watch the video below to find out what I think.
Be sure to also scroll down for more commentary and an annotated chart.
So far, the USDJPY is playing out beautifully.
I wrote about the pair when it was hovering just above the 106.80 level on October 7.
That’s where USDJPY broke out from in early September.
I also discussed the pair’s reversal potential in Saturday’s Forex forecast video.
One thing I pointed out in that October 7 commentary was the potential inverse head and shoulders pattern.
It was going to take a daily close above the 108.00/30 area to confirm the reversal pattern.
The USDJPY did just that on Friday.
You can even see where Monday’s session retested former neckline resistance as new support at 108.00.
The 450 pip height of the pattern puts the measured objective around 112.50.
However, buyers still have to deal with 109.00 and 110.60 on the way up.
Both will be critical tests for USDJPY bulls.
But if buyers can clear the 108.45 area on a daily closing basis, I would expect to see them defend the area as new support.
Notice how 108.45 has capped every advance since September 18.
All in all, I have to stay bullish the USDJPY while above former neckline resistance near 108.00.
Stay above that, and we could see the pair trend toward 109.00, 110.60, and perhaps even the measured objective between 112.15 and 112.50.