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Forex Analysis: USD/JPY Bullish Trend Consolidates in Pennant Pattern

USD/JPY Daily Chart

USD/JPY (daily chart) has fallen into a tentative consolidation to form a technical pennant pattern. This chart formation occurs after the pair made significant gains starting in mid-November. These gains broke out above the important 80.50 level to reach a 7-month high of 82.82, before retreating slightly in the form of the current pennant. The pattern also occurs within the context of a strong bullish trend extending back to the September 77.12 low. Pennants can be considered trend continuation patterns if the requisite breakout occurs. In this instance of a bullish trend, if a breakout above the upper border of the pennant occurs, price could move towards a potential re-test of the 84.00 area high, last hit in mid-March. The bottom border of the pennant resides around the 81.75 support region. Any significant breakdown below that area could invalidate the pennant pattern and prompt a potential return to the key 80.50 level to the downside.

James Chen, CMT
Chief Technical Strategist
FX Solutions

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James Chen

James Chen

James Chen is Chief Technical Strategist for City Index Group. He is also a Chartered Market Technician. He is the author of the books: "Essentials of Foreign Exchange Trading" (John Wiley & Sons, 2009) and "Essentials of Technical Analysis for Financial Markets" (John Wiley & Sons, 2010). Mr. Chen writes currency analysis, leads forex trading seminars and has appeared in numerous major financial media outlets, including CNBC, Bloomberg TV, Forbes, Reuters, Dow Jones, and the Associated Press.