USD/JPY traded higher overnight but hit resistance slightly below the 111.75 zone, near the upper end of a triangle formation that’s been in place since the end of February. Then, the rate retreated somewhat. Although the prevailing broader trend remains to the upside, as long as the rate continues to oscillate within the triangle, we will hold a wait-and-see stance. We would like to see the pair exiting the pattern before we get confident on its forthcoming near-term directional move.
A clear move above 111.75 could confirm the break above the triangle’s upper bound and may signal trend continuation. This could initially aim for the peak of March 5th, at around 112.15, the break of which would confirm a forthcoming higher high on the daily chart and perhaps carry larger bullish implications. The next area that could act as a resistance may be around the 112.65 level, which prevented the rate from moving higher on December 18th and 19th.
Shifting attention to our short-term oscillators, we see that the RSI lies above 50, but turned down recently. The MACD is fractionally above both its zero and trigger lines. Both indicators suggest mildly positive speed, but the fact that the RSI turned down make us cautious that further retreat may be looming for now, at least within the triangle.
In order to start examining a short-term bearish case, we would like to see a decisive dip below 1115, or even better, below 111.00. Such a dip may signal a downside exit out of the aforementioned triangle and also confirm a forthcoming lower low on the 4-hour chart. The bears may then aim for the 110.70 area, the break of which may extend the slide towards the low of February 27th, at around 110.35.
