USD/JPY (daily chart) has retraced to the downside after extending slightly above strong resistance around the 88.00 price region early in the week. In view of the steep stair-step climb that has prevailed with this pair for more than three months, the current pullback could potentially be considered part of yet another step within the steep bullish trend that extends back to the mid-September 2012 low around 77.00, and which accelerated to the upside in mid-November 2012. After its push above 82.80 in mid-December, USD/JPY went on to breakout above 84.00 and then 85.50 in late December before rising even further to hit a high above 88.00 resistance early in the week, establishing yet a new 29-month high in the process. Although the last two days have seen a significant price pullback, and a further bearish correction of the over-extended bullish run might once again find potential support around the key 85.50 level, the overall trend momentum could potentially continue its steep bullishness towards the psychologically important 90.00 level on a re-break above 88.00.
James Chen, CMT
Chief Technical Strategist
FX Solutions
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