The US dollar has been notably stronger against the Japanese yen currency over the last seven days, with the pair rising by over one hundred pips and performing its strongest monthly price close since May this year.
Rising US equity markets and improved sentiment towards a Sino-US trade deal are pushing the USD/JPY pair close to 110.00 level, which as well as being psychologically important level also holds extreme technical importance.
USD/JPY medium-term price trend
The USD/JPY pair is technically bullish while trading above the 108.40 level, which is the current location of the pair’s 200-day moving average. A large falling wedge pattern has been unfolding over the last few months, with both sellers and buyers failing to perform a breakout from either side of the pattern.
Sellers repeatedly struggled to force a breakdown under the USD/JPY pair’s 200-day during November, further confirming that the medium-term upward bias remains intact.
The top of the wedge pattern is currently located just below the 110.00 level, a bullish breakout above the falling wedge pattern could see the USD/JPY pair advancing towards major trendline resistance, around the 111.10 level.
USD/JPY short-term price trend
The short-term bullish trend in the USD/JPY pair remains intact while price trades above the 108.90 level. If bulls fail to move past the 109.66 level in the near-term, a pullback towards the pivotal 108.90 level seems likely.
The strong reversal in the US dollar index on Friday appeared to delay an upcoming test of the 110.00 level. Should we see a continuation of US dollar bashing in early week trade, it is likely to weigh on the USD/JPY pair.
Traders that are bullish towards the USD/JPY pair in the short-term are likely to be lurking around the 108.90 level, in anticipation of another push towards the 109.66 resistance level.
A breakout under the 108.90 could expose further losses towards the 108.60 level, with the 108.30 level acting as critical technical support.
USD/JPY technical summary
Traders that are bullish towards the USD/JPY pair over the medium-term are likely to target major trendline resistance on the daily time frame around the 111.10 level, if a breakout above the 110.00 level takes place.
In the short-term, bulls should continue to buy in the towards the 108.90 level. Events surrounding the US dollar index should be the major technical catalyst for the USD/JPY pair this week.