USDJPY shot up on Friday following the robust US employment report and opened with a positive gap today. The rally took the pair above the downtrend line drawn from the high of November 21, as well as above the key resistance (now turned into support) zone of 130.60. On top of that, today, the pair is trading above the 200-EMA, which adds credence to a short-term reversal case.

The RSI has flattened near 70, while the MACD, although well above both its zero and trigger lines, shows signs of slowing down. These signs suggest that due to the overstretched rally, a small pullback could occur before the next leg north.

The bulls could recharge from near the 130.60 zone and push for a test at the 133.00 territory, defined as resistance by the high of January 11. If they are not willing to stop there, then they may extend their march towards the next key territory of 134.80, marked by the peak of 134.80. That zone provided support as well back on December 13 and 14.

For the outlook to turn bearish again, USDJPY may need to dive below the 127.20 barrier, marked by the low of January 16. This may validate the break below an upside line drawn from that low, but most importantly, it will confirm a lower low on bigger timeframes. The next stop could be at 125.00, marked by the low of April 14, 2022, and the inside swing high of March 28, 2022.