USDJPY Maintains Its Longer Term Uptrend

USDJPY rose off its daily 100 ema/.382(114.44-122.18 rally) Ret to register a higher weekly close at 121.07 on Friday reversing most of its previous week’s gains. This is coming on the back of a sharp decline violating the 119.98/87 levels (representing its Oct 13’06/Feb 06’07 highs) to a low of 118.99 the previous week.

The pair has been on a steady rise since hitting a low of 108.97 in May’06.That upside gains pushed it in early Oct’06 to 119.87 high before running into a cluster of resistance from its Jan/Mar’06 highs at 119.30/39 zone. It however failed to push above these levels and subsequently collapsed to a three-week low at 116.57 in late Oct’06.Another two weeks of sideways trading followed before continuing lower to complete the second leg of its early Oct’06 decline. The pair formed a bottom in early Dec’06 and confirmed it after a five-week of upside pressure pushed it through 119.87 levels closing at 120.72, the highest price seen at time since Dec’05.The pair has since then shot to the upside hitting a high of 122.18, the highest price achieved since Dec’2002.USDJPY later sold off that high to a low 118.99(Feb 16’07) before its present recovery.

Figure 1: Daily Chart

Figure 2: Weekly Chart

Figure 3: Monthly Chart

What are the hurdles that lie ahead as the pair continues in its quest for further upside gains? The first upside barrier that it has to overcome is seen at 122.04/18, its Jan 29’07/Feb 11’07 highs. If a break and close above here occurs, then the next challenge will be on 125.64/72, its Oct/Dec’02 highs with a violation of this zone opening the door for further upside gains towards 126.90, its monthly 200-ema.In addition, its daily and monthly momentum indicators remain supportive of this view. On the contrary, its downside risk comes in at 119.98/87 levels, representing its Oct 13’06 high/Feb 06’07 low followed by 118.99, its Feb 16’07 low. Below here targets its daily 200 ema/Jan 05’07 low at 118.12/117.97 ahead of 116.57, its Nov 01’06 low.

Overall, with momentum and price action pointing higher, USDJPY should continue to put pressure on the upside for further gains.

Happy Trading!

Mohammed Isah is an experienced technical analyst, a professional trading instructor and mentor. He initially traded stocks and now primarily focuses on Forex. He is Head of Market Research and Analysis of FX Instructor LLC, a firm that provides world-class multi-lingual forex education.
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