On July 6, I pointed out the 110.30 area on the USDJPY. Given the confluence of support that had gathered there, I deemed it a “must hold” for buyers.
I was skeptical at the time as to whether buyers could pull it off. The pair was having trouble moving higher from the region and was beginning to lean on ascending channel support quite heavily.
However, the two-day rally below speaks for itself. The pair is up an impressive 150 pips since Tuesday’s close, and I see no indication of fatigue.
Yesterday’s close puts the USDJPY back above the 112.00 handle. The level supported prices throughout December 2017 and also helped attract a bid on January 2nd of this year.
As long as the pair stays above this level on a daily closing basis (New York 5 pm EST), the bullish outlook is intact. The next key resistance doesn’t come in until the December 2017 highs near 113.60.
That doesn’t mean we won’t see a pullback though. In fact, judging by the gap between the current price and the 10 and 20 EMAs (which I use to find the mean), a pullback to 112.00 would only benefit the rally effort.
Additionally, if we treat the smaller descending channel as a bull flag, then the USDJPY may not exhaust itself until the 115.00 region. That also happens to line up with several highs between January and March of last year.
In summary, I’m bullish the USDJPY, but I won’t consider an entry at the current price. A pullback into the 112.00 support area would pique my interest for a move higher to 113.60. Alternatively, a daily close below 112.00 would put the bullish outlook on hold.