Trade idea: USDJPY basing around 111 - Potential long opportunities!
|The USDJPY currency pair is forming a base around the 111.00 support level.
As we discussed in our weekly analysis here, this level represents the lowest support point of the broken weekly trendline. USDJPY attempted to break below 111.00 several times over the past week, but it never closed below it. On the daily chart, it can be even seen that USDJPY formed 2 bullish hammer patterns and 1 bullish engulfing candlestick pattern. These are solid signs of a bottom.
Further, switching to the 4-hour chart, we can see that USDJPY has drawn an inverted head and shoulders pattern which is shown below. The pair is now testing the neckline around the 111.15 level and a break above it will confirm the bullish reversal. Another encouraging sign for a bullish reversal here is the bullish divergence on the RSI as shown below on this 4-hour chart.
The target of the head and shoulders pattern is projected around the 111.90 area and could extend to 112.00. Above it, if the bullish price action accelerates, the highs around 113.00 will probably also be reached.
The calendar is also busy for the USDJPY pair this week, with both the Fed and the Bank of Japan meeting. In addition, the Non-Farm Payrolls on Friday will be another source of volatility for USDJPY.
Given the notably higher interest rates in the US and the hiking path on which the Fed is in contrast to 0% interest rates in Japan and a still BOJ, the fundamentals also tend to support a higher USDJPY. The main risks to a higher USDJPY would, of course, be any worsening of trade tensions or other factors that could threaten the overall risk sentiment in markets.
USDJPY Current Trading Positions
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