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  • USD/JPY reversed an early dip to 104.80 area and refreshed daily tops in the last hour.
  • The set-up favours bullish traders and supports prospects for a move to the 106.00 mark.
  • A sustained break below the daily swing lows is needed to negate the positive outlook.

The USD/JPY pair attracted some dip-buying near the 104.80 region and refreshed daily tops during the first half of the European trading session. The pair was last seen trading near the 105.40 region, with bulls looking to find acceptance above a four-month-old descending trend-line resistance.

Meanwhile, technical indicators on the daily chart have just started gaining positive traction and support prospects for an eventual bullish breakout. Some follow-through buying beyond overnight swing highs, around the 105.65 region, should pave the way for a further near-term appreciating move.

The USD/JPY pair might then aim back towards reclaiming the 106.00 round-figure mark. The mentioned level coincides with 100-day SMA barrier, which if cleared decisively will be seen as a fresh trigger for bullish traders and negate any near-term bearish bias amid a modest pickup in the USD demand.

On the flip side, the key 105.00 psychological mark now seems to protect the immediate downside. Failure to defend the mentioned support, leading to a subsequent fall below the daily swing low, around the 104.80 area, might turn the USD/JPY pair vulnerable to retreat further from three-week tops.

The downward trajectory could then get extended towards the next major support, around the 104.00 mark. Sustained weakness below could prompt some technical selling and drag the USD/JPY pair back towards challenging multi-month lows, around the 103.20-15 region, touched on Friday and Monday.

USD/JPY daily chart

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Technical levels to watch