USD/JPY Consolidating Near the Newly Established High

USD/JPY is holding steady in today’s trading, down only marginally from Wednesday’s North American close. The pair is currently trading at 114.33, down 0.10%.

In yesterday’s trading, the pair broke out to new rally highs as the dollar advanced following a round of strong US economic data.

As a result of the breakout, the pair is now 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 yesterday’s move higher, extreme overbought conditions are once again a factor. This, combined with the close proximity of resistance, signaled a period of consolidation could develop over the near term.

On 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. Thus far, this former high has been able to offer support in today’s trading.

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.

In the US today, initial jobless claims are on the calendar, as is construction spending and the ISM manufacturing survey. October construction spending is projected to come in showing an increase of 0.6% following a decline of -0.4% in September. Regarding the ISM Index, economists expected the figure to rise slightly to 52.1 from 51.9 in October.

The key report for the week, however, is nonfarm payrolls for November on Friday. This figure will be particularly important given the expectations for a rate hike in December. Consensus estimate is for an increase of 180K jobs. The strong ADP report released yesterday set a positive tone for the BLS report on Friday.

USD/JPY Daily Chart


Tracy L. Morganthall, CMT, has been a Technical Market Analyst for more than 20 years. She has experience analyzing and producing reports on equities, both domestic and international markets, as well as Forex and commodities. She attended Trenton State College in Trenton, New Jersey, earning a Bachelor's in Finance.