- The USD/JPY pair is bullish as long as it stays above the uptrend line.
- A new higher high could activate further growth.
- Only a valid breakdown below the uptrend line may invalidate the upside scenario.
The USD/JPY price continues to move sideways in attempt to accumulate further bullish energy before extending the upside. The pair is trading at 138.40 at the time of writing.
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Technically, the current sideways movement represents an upside continuation pattern. After its strong rally, a temporary retreat or an accumulation was natural. It tries to attract more buying traction. The currency pair dropped a little in the short term as the Dollar Index slipped lower while the Japanese Yen Futures rebounded.
Fundamentally, the Japanese economic data came in mixed today. The Retail Sales rose by 2.4% versus 1.9%, Prelim Industrial Production surged by 1.0% even though the analysts expected a 0.5% drop, Consumer Confidence came in at 32.5 points compared to 29.4 expected, while the Housing Starts dropped by 5.4% more compared to 3.4% expected.
Still, the US ADP Non-Farm Employment Change is seen as the most important event of the day. The indicator is expected at 300K versus 128K in the previous reporting period. In addition, the Chicago PMI could jump from 52.1 to 52.5.
USD/JPY price technical analysis: Accumulation phase in action
In the short term, the USD/JPY is trapped between the R2 (138.90) and the R1 (138.20) levels. As long as it stays above the R1, 137.70, or above the up trendline, the USD/JPY pair could resume its leg higher. The bias is bullish, so temporary retreats could bring new long opportunities.
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As you already know from my previous analysis, the 139.38 historical level is seen as a major upside target. An upside continuation could be confirmed only by a valid breakout above this level. Coming back to test the 137.70 and the uptrend line could bring new long opportunities around these levels. Also, a new higher high may signal further growth and a potential breakout through 139.38.
Technically, only a valid breakdown below the up trendline could invalidate further growth and might open the door for a new sell-off.
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