USD/JPY: Double Top or Mere Pullback?
It’s been an interesting week for USD/JPY to say the least.
The pairing of two “safe haven” started the week by rallying to nearly 116.00 before turning lower to close the week near its two-week low around the 115.00 level. As you might expect, the conflicting headlines about the ongoing geopolitical situation between Russia and Ukraine (and by extension, “The West” more broadly) have had a major impact on the pair, as has the FOMC minutes, which appeared to indicate less interest in a 50bps “double” rate hike than some traders were expecting.
Meanwhile, rates continue to edge lower after seeing last week’s rally stall out at the exact same 116.35 level that capped the start-of-the-year surge. Now, traders will be wondering if the year-to-date price action marks a bearish “double top” pattern targeting sub-112.00 levels or perhaps a more bullish “cup-and-handle” formation hinting at a move toward 118.00+.
For now, traders are likely to break ties in favor of the longer-term uptrend and look at the current dip as a buying opportunity as long as intermediate support levels in the 114.15 and 113.50 areas remain unbroken. A break above 116.35 resistance in the coming weeks would be a strongly bullish sign and open the door for a continuation above 118.00 next.
The pairing of two “safe haven” started the week by rallying to nearly 116.00 before turning lower to close the week near its two-week low around the 115.00 level. As you might expect, the conflicting headlines about the ongoing geopolitical situation between Russia and Ukraine (and by extension, “The West” more broadly) have had a major impact on the pair, as has the FOMC minutes, which appeared to indicate less interest in a 50bps “double” rate hike than some traders were expecting.
Meanwhile, rates continue to edge lower after seeing last week’s rally stall out at the exact same 116.35 level that capped the start-of-the-year surge. Now, traders will be wondering if the year-to-date price action marks a bearish “double top” pattern targeting sub-112.00 levels or perhaps a more bullish “cup-and-handle” formation hinting at a move toward 118.00+.
For now, traders are likely to break ties in favor of the longer-term uptrend and look at the current dip as a buying opportunity as long as intermediate support levels in the 114.15 and 113.50 areas remain unbroken. A break above 116.35 resistance in the coming weeks would be a strongly bullish sign and open the door for a continuation above 118.00 next.
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