USD/JPY rallied and resumed its upside journey because the Dollar Index has jumped higher as well. On the other hand, the Japanese yen is still weak as the Nikkei (JP225) stays higher. The pair has confirmed its Double Bottom pattern in yesterday's trading session, so the current rally is natural.
Today, the Japanese economic data failed to help the Yen to rebound. The National Core CPI rose by 0.0% as expected while the Flash Manufacturing PMI was reported lower at 51.2 versus 52.5 points expected and compared to 52.7 points in the previous reporting period.
On the other hand, the US New Home Sales jumped higher from a revised 729K to 740K versus only 712K expected.
USD/JPY strongly bullish
The USD/JPY pair ignored 110.22, R1 (110.38), and 110.41 confirming the reversal pattern (Double Bottom). It has almost reached the former high of 110.80 which stands as a static resistance.
As you can see on the h4 chart, the pair moved somehow sideways between the 110.80 and 109.11 levels. If the pair makes a valid breakout above the R2 (110.80), the former high, it could activate further growth towards 111.65 high.
In the short term, a temporary decline from 110.80 could help us to catch new long opportunities. Right now, it's too late and risky to buy it. Personally, I'll wait for either a valid breakout above the 110.80 or a temporary retreat after the current rally before going long again.
USD/JPY forecast
A breakout through the high of 110.41 signaled more gains ahead. Failing to make new lower lows invalidated further drops. The Double Bottom pattern signaled a potential reversal. Taking out the 100.80 upside obstacle may signal an upwards movement towards 111.65.
The material has been provided by InstaForex Company - www.instaforex.com