On the daily chart below for USDJPY , we can see that the price found support at the trendline and the 133.77 level. The moving averages remain crossed to the upside which keeps the uptrend intact. We can also notice that the market is forming an ascending triangle, which is generally followed by big moves once the price breaks out on either side.
The culprit for this USD/JPY rally is the rise in the Treasury yields due to the recent better than expected data and rising long term inflation expectations in the University of Michigan report. Fed Chair Powell once mentioned that they are looking at those expectations for their policy decision, so the bond market reacted accordingly.
USDJPY technical analysis
On the 4 hour chart below, we can see that after breaking above the 135.09 resistance, the price extended the rally towards the 136 handle. Yesterday, US Retail Sales beat expectations and gave the USD another boost for a run towards the 137 level. The moving averages will act as resistance now and we should see new higher highs unless the Jobless Claims tomorrow show a big miss to the expectations or Fed Chair Powell on Friday sounds dovish.
On the 1 hour chart below, we can see that we have a trendline supporting this rally and that the price bounced from a resistance-turned-support during the APAC session. We can also see that we have a divergence with the MACD which is generally a signal for weakening momentum and it’s often followed by pullbacks or reversals.
If we do get a pullback, the buyers should lean to the support zone at 136.25 where they will also find the trendline and the red long period moving average for further confluence. The sellers, on the other hand, will want to see the price breaking below that support zone to pile in and push the price towards the 135 handle.
