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  • USD/JPY added to its recent positive move and gained traction for the third straight session.
  • The formation of a bullish pennant on the daily chart supports prospects for further gains.
  • Only a sustained break below the 109.40-35 region will negate the near-term positive bias.

The USD/JPY pair edged higher for the third consecutive session on Tuesday and climbed to one-and-half-week tops, around the 110.15 region during the first half of the European session.

The USD/JPY pair was last seen hovering near a resistance marked by a downward sloping trend-line, extending from YTD tops touched in March. This, along with another ascending trend-line, constitutes the formation of a symmetrical triangle on the daily chart.

Given the strong positive move from YTD lows, or sub-103.00 levels touched in January, the mentioned triangle might be categorized as a bullish continuation pennant chart pattern. A sustained move beyond will set the stage for an extension of the near-term appreciating move.

The constructive setup is reinforced by the fact that oscillators on the daily chart have just started gaining positive traction. A subsequent move beyond monthly swing highs, around the 110.30-35 region will reaffirm the bullish breakout and prompt some technical buying.

The USD/JPY pair might then aim to retest YTD tops, around the 111.00 neighbourhood. The momentum could further get extended towards the next relevant hurdle near the 111.50-55 region, though bulls might be reluctant to place aggressive bets ahead of the FOMC.

On the flip side, the 109.70-65 horizontal zone now seems to protect the immediate downside ahead of the triangle support, currently near the 109.40-35 region. Sustained weakness below will negate any near-term positive bias and turn the USD/JPY pair vulnerable.

The next relevant support is pegged near the 109.00 round figure, below which the USD/JPY pair could extend the corrective slide further towards the 108.70-60 support zone.

USD/JPY daily chart


Technical levels to watch