The US dollar staged a major rally against the Japanese yen last week after the pair found meaningful support from the 101.20 level.
USD/JPY analysis shows that the 108.00 level offers major resistance this week and a potential area where traders may face the recent recovery.
USD/JPY medium-term price trend
The US dollar staged a huge recovery against the Japanese yen last week as selling appetite below the 102.00 level started to subside.
The reversal in the USD/JPY accelerated as central bank policy action prompted a strong recovery in US equity markets.
USD/JPY technical analysis over the medium term shows that the pair faces huge resistance from the 61.8 Fibonacci retracement of the current yearly low to high.
The 61.8 Fibonacci retracement level is located around the 108.00 level, and is likely to be a pivotal area to watch this week.
Gains above the 108.00 level could spark a rally towards the 109.00 level, while a rejection from Fibonacci resistance could cause heavy USD/JPY selling.
It is noteworthy that the recent bounce may be helping to create a final right-hand shoulder to complete a massive head-and-shoulders pattern on the daily time frame.
USD/JPY short-term price trend
USD/JPY technical analysis shows that the pair has a strong short-term bearish bias while the price trades below the 108.60 level.
The lower time frames continue to show the existence of pockets of bullish MACD price divergence. The recent rally has eradicated bullish divergence extending towards the 106.50 level.
However, looking more closely at the 30-minute time frame, bullish MACD price divergence also extends towards the 110.00 level.
Gains above the 108.60 level this week may offer a clue that the bullish divergence will eventually be reversed around the 110.00 level.
USD/JPY technical summary
USD/JPY analysis shows that the USD/JPY pair could continue to rally as bullish MACD price divergence is reversed. Gains above the 108.60 level could trigger a rally towards the 110.00 level.