USD/JPY has broken out to new rally highs in today’s trading, with the pair currently trading at 114.28, up 1.7%. The pair is higher as the dollar is advancing following a round of strong US economic data.
As a result of today’s move to the upside, USD/JYP is testing the next level of resistance at the highs established in mid-February and early March, near the 114.445-114.876 zone. On a break above this level, the next target for the pair is at the 116.00 level.
With today’s move higher, extreme overbought conditions are once again a factor. This, combined with the close proximity of resistance, could result in a near term period of consolidation over the near term.
On a move to the downside, first support is now at the former rally peak, at November 25th’s 113.90 high. Holding this level on a move to the downside would be considered a sign of strength and keep the pair well-positioned for a resumption of the advance.
On a move below this level, the target becomes the November 28th low at 111.36, which represents a test of the corrective top established in late May. A return to this level would result in no technical damage to USD/JPY, keeping the broader bias in the pair to the upside.