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Daily Chart USD/JPY
The pair had been in a strong uptrend but has now consolidated between R1 and S1. S1 has been identified to be a strong floor for the pair which has tested this level twice. S2 is a weak floor for the pair which has tested this level once and failed to break it.
R1 is a strong ceiling. The pair has tested this level once and has failed to break it. R2 has not yet been tested and the last test was in June 2007. Therefore, R2 remains a strong ceiling for the pair. A break of R2 would break new highs for the pair since the financial crisis.
Technicals: RSI (Relative Strength Index) and MAs (Moving Averages)
· The 200-day MA and the 50-day MA is upward sloping indicating a bullish stance for the pair. The 200-day MA and the 50-day MA will also provide additional support to the pair respectively.
· The RSI is neither in overbought nor oversold territory although recently it was in overbought territory. If the uptrend is to continue the pair is expected to head back into to overbought territory.
The pair is bullish in the short-term. Japan is likely to experience continued low inflation due to the slump in oil prices. Together with this growth is also likely to remain subdued until old stock is sold. Low oil prices and strong economic data should warrant the Fed to initiate an earlier interest rate hike in 2015.
Ajay Pankhania
Technical Analyst
Accendo Markets
