USD/JPY: Technical Analysts are Still Bullish

- USD/JPY continues to face tough resistance between 111 and 112.

- Analysts remain bullish despite repeated failure at resistance.

- Ellioticians say there is possibility of strong wave higher unfolding.

Image © Leonid Andronov, Adobe Stock 

USD/JPY has been range-bound for several weeks but is now ticking higher and a close above 112.15 would be a bullish confirmation sign for the pair, according to Richard Perry, an analyst at Hantec Markets.

"There is a sense still that the market is failing around the higher 111s area, of 111.75-80. And then around 112.15 you see all these resistance levels, so you need to see a breakout through that on a closing basis to get excited, and even then you see these failings so unless you see RSI in the 60s and a close above 112.15 I don't think you can get too excited," says Perry.

Perry sees a "slightly positive bias" but nothing yet convincing for the pair. His view chimes with that of Valeria Bednarik, an analyst at FXStreet, who is cautiously bullish despite much resistance.

"The pair is once again battling with a strong resistance area, and despite ongoing risk aversion, the short-term technical outlook favors the upside, as, in the 4hr chart, it remains well above its 100 and 200 SMA, both directionless and converging around 111.05, while technical indicators are barely retreating from overbought readings," says Bednarik.

Bednarik also says a possible recovery in US equities or persistent strength in US yields could "push the pair through the daily high", which would offer scope for an extended recovery up to the 112.14 August monthly high.

Further supporting a bullish outlook are two separate Elliot Wave analysts who both agree that the next move higher is probably a strong wave 3. It is not usually the case they agree and probably suggests a higher degree of confidence in the forecast.

Alex Geuta, an Elliot Wave analyst at FX broker Liteforex, says the pair has probably finished forming a wave (B) down at the March lows and is currently in the process of rising up in the third wave of a 5-wave (C) structure, which could end above 120.

Above: USD/JPY chart showing Elliot Wave analysis.

Enda Glynn, another Another Elliotician and owner of bullwaves.org, says the short-term outlook for USD/JPY is positive but that there are caveats to this view.

"We have had a three wave pattern completing wave [ii] possibly, and now we have had after price action reaching the lower trendline a nice impulsive move to the upside. As long as the 110.37 low holds and the wave [i] highs at 111.80 are broken it will indicate the trend is now moving higher in a new impulse wave [iii] up," says Glynn.

Above: USD/JPY chart showing Elliot Wave analysis.

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