The Bank of Japan members will be sleeping a little easier tonight as the USD/JPY continues to claw it’a way higher moving slowly away from the danger area of the 77.00 region and a further round of intervention by the bank, but they are not out of the woods just yet! Thursday’s solid move higher to test the 80.00 region, was promptly reversed on Friday with a sharp move lower, as the pair closed the week at 79.50 and back below this key psychological level once again. So what are the charts telling us about the pair for the week ahead.
First, the trading indicator on the daily chart remains firmly bullish since it’s transition from dark green to bright green two weeks ago. Second, the trend on the daily chart remains bullish, despite Friday’s move lower, and in addition, and perhaps more importantly, the three day trend is also firmly bullish. These bullish trends are also supported by buying volume in both timeframes, with only Friday’s selling volume spoiling the bullish picture. Finally, our second trading indicator delivered a conservative trend signal, validating the aggressive volume entry signal of the week before, and indeed on Thursday, this signal received further validation with a grey volume re-entry signal.
From a technical perspective the key level for this week is now in the 80.55 area on the daily chart. This is the upper region of a deep area of price congestion, well defined with the isolated pivot highs. If this is breached with a clear break and hold, then expect to see the pair continue their journey higher, much to the relief of the BOJ no doubt.
By Anna Coulling