One currency pair which has moved out of the limelight over the last few weeks is the USD/JPY, and following the extended trend run higher of 2013 and 2014, the new year has seen the pair becalmed and trading in a relatively narrow range. And for any analysis the monthly chart is perhaps the place to start, and here we can see the deep level of price resistance in the 120 region, which brought an abrupt halt to the surge higher of late 2014, with December’s long legged candle signalling indecision on high volume, followed by January duly reversing with a wide spread down candle and ultra high volume. The currency strength indicator to the left of the chart confirms this for the individual currencies, with the Japanese yen (purple) at the bottom of the chart now starting to move away from the heavily oversold region, and the US dollar climbing into the overbought region, with the potential to reverse from this region in due course.
Moving to the daily chart, here the current congestion phase is clearly defined, with the upper resistance level at 118.70 and the support platform now building in the 117.00 area, denoted by the blue dotted line. In addition, the daily chart is also developing a falling triangle pattern, with the base building on the second level support in the 115.50 region, and should this be breached in due course, then we can expect to see the pair break lower, with the potential to develop a longer term bearish trend in due course.
By Anna Coulling