Technical Analysis – USDJPY looks overbought after sharp ascent; bullish overall

USDJPY resumed its broad positive trend after the bulls drove aggressively to a five-year high of 116.33 on Tuesday, marking seven consecutive days of gains.

Despite the fast ascent, the pair could not close above the 116.11 limitation taken from late 2016 and start of 2017, with the price sliding back to the negative territory during the early trading hours today.

A deceleration cannot be ruled out in the coming sessions as the market seems to be trading in overbought waters according to the RSI and the fast Stochastics. Yet, the upward pattern in the market has yet to show any sign of weakness and the ascending trendline is still safely navigating the price action northwards. Hence, unless the bears press the price below that trendline currently seen at 114.00, any declines could be of minor concern and buyers could remain on board.

Before the bears reach that key line, the price may seek initially support within the 115.45 – 115.25 region and then somewhere between 114.65 and 114.45. Falling beneath 114.00, the spotlight will turn to the 113.20 handle.

Should the bull run continue, the door would open for the 117.00 psychological mark and the 261.8% Fibonacci extension of the 115.88 – 112.52 downleg at 117.36. Additional gains from here would clear the way towards the tough resistance of 118.65 from December 2016.

Summarizing, although the recent sharp pickup in USDJPY may lose pace in the short-term amid strengthening overbought signals, the upward trajectory could keep buying confidence intact, as long as the price holds above 114.00.

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