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USDJPY Hits 105.40, Ready for a Pullback?

by on December 30, 2013 8:13 am GMT
 

The yen continues to slide lower as risk currencies gain in early Monday trade. The US dollar is modestly lower along with precious metals and US equity futures. Economic data is light, but the US will report pending home sales MoM. This should get markets moving and have an impact on the dollar.

On Friday, the USDJPY broke through the highly anticipated 105 mark, and tonight the pair was able to breach 105.40. Is it time for a pullback? The 4H chart shows the strengthening momentum in the pair, but it has increased almost 100 pips without any real pullback.The RSI is in the overbought territory, above 75. An intraday pullback is likely given the run over the last several sessions. The 4H chart shows support at 105 and 104.51.

4H Chart of USDJPY

4H Chart of USDJPY

The 10-year weekly chart gives a rather bullish outlook over the short- to mid-term. Price action was able to close above 105 which has shown to be a historical inflection level. USDJPY is getting overdone on the weekly, too, with a RSI of 70. However, the USDJPY can correct and move higher swiftly. The chart also shows that the pair can trend higher in overbought territory for a significant period of time. The ADX is trending higher, and the +DMI is ticking up, as well.

The weekly chart is showing that technicals (along with current fundamentals) could push the pair to 107.42.  A secondary upside target can be found at 110. Support will be located back at 105 with a deeper correction level at 101.10.

Look for USDJPY to consolidate and digest recent moves with the overall outlook positive. The dollar is still suspect, but as long as the yen continues to decline then USDJPY should continue to much higher.

WK Chart of USDJPY (10Y)

WK Chart of USDJPY (10Y)