Technical Sentiment: Bullish

Key Takeaways

• JPY suffers across the board as Consumer Confidence in October falls to 38.9;
• Japan Economy Watchers Sentiment came out at 44.0, well below the expected 49.2;
• USD/JPY eyes more gains after breaking above the 115.50 resistance.

Market participants are showing renewed interest in selling JPY across the board, with USD/JPY already priced above a major resistance level.

Technical Analysis

Late last week, USD/JPY showed several weakness signals post-NFP, forming a double top reversal pattern over the course of two days. This weakness was followed by a moderate drop down to 113.82, approximately 170 pips from top to bottom; as a result we cannot complain that pattern didn’t pan out as planned, at least in intraday trading.

Since the 10th/11 U.S. trading session, however, buying momentum began building again at a steady pace, lifting USD/JPY up to last week’s resistance and ultimately above. Spot is currently trading around 115.60, as the pair is about the re-test 115.50 from above. If this level holds and USD/JPY continues to trade above resistance, traders will focus on 117.50/60 next, a price pivot level dating back to 2007, which could also be an intermediary target on the way towards 120.00 in the long term.

Stochastic is warning of extreme overbought conditions on all major timeframes, but with no price action signs confirming a correction and while the Higher Highs & Higher Lows swing configuration holds, buying dips and resistance breakouts remains the preferred strategy for USD/JPY.

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Prepared by Alex, Currency Strategist at Capital Trust Markets