USDJPY stays within bullish triangle; outlook fragile

USDJPY is setting another foothold marginally below the 115.00 round level and near the supportive trendline, which now looks to be part of an ascending triangle pattern with an upper boundary at 116.33.

This type of triangle is usually a bullish formation that anticipates an upside breakout, but for that to happen the price will first need to close above the nearby constraining 20-day simple moving average (SMA) at 115.24 and then gear sustainably above the 115.50 tough resistance. Such an action would immediately bring the crucial ceiling of 116.11 – 116.33 under examination. Then, a decisive move higher from here would validate the positive triangle pattern, likely sending the price straight up to the 117.00 – 117.50 region last seen during the 2014 – 2016 period. Two restrictive trendlines are currently adding extra importance to that zone.

The technical oscillators, however, are not very optimistic at the moment, dashing hopes for a meaningful rally as the MACD remains negatively charged below its red signal line, the RSI is moving back and forth around its 50 neutral mark, and the fast-Stochastics are sloping downwards.

Should the bears ruin the bullish trend triangle pattern below the supportive trendline at 114.89, the spotlight will shift to the 114.40 – 114.00 territory. Another negative extension here could see some stabilization around the previous lows registered between 113.46 and 113.13, while deeper, any violation of the 112.70 – 112.52 region would put the broad positive trend at risk, especially if the 200-day SMA gives way after a long time.In brief, USDJPY is maintaining a neutral short-term outlook within the three-month-old bullish triangle formation. A sustainable rally above the top of 116.33 or a slump below 114.89 could direct the market accordingly.

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.

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