Bulls taking charge, USDJPY surge higher
The USDJPY pair found some solid resistance at 114.696 and from that level, the sellers have managed to take control of this market. The recent performance of the U.S economy is not up to the mark and the ongoing issue regarding FED rate hike policy has created massive cloud into the mind of optimistic dollar bulls. However, the USDJPY pair has found some solid support at 104.65 and most of the aggressive price action traders have already gone long. Currently, they have moved their stop loss to the breakeven position with a hope to ride the fresh bullish trend.
USDJPY daily chart analysis
Figure: Potential break of inverse head and shoulder
From the above figure, you can clearly see that the pair has breached the neckline of the inverse head and shoulder pattern. Those who have failed to execute long orders near the critical support level at 104.65 has nothing to worry. The conservative traders are waiting for a minor pullback of the price near the 106.42 level (broken neckline) to execute fresh long orders. If the bulls manage to control of the market from this current level, the first bullish target for this pair would be the critical resistance level at 108.26.From that level, we might see some bearish pressure but a daily closing of the price above the 108.26 market will confirm the establishment of the medium-term bottom near the critical support level at 104.65.
USDJPY weekly chart analysis
Figure: Price surging higher above the 61.8% retracement level
Though we had an initial breakout of the 61.8% retracement level, the bulls have finally managed to established new momentum by breaking the 61.8% retracement level. In the weekly chart, the pair is currently testing a minor resistance level at 107.80 and this might provide some bearish retracement to this pair. Any bullish price action confirmation signal near the critical support level at 106.60 will be an excellent opportunity to execute long orders. The first bullish target for this pair would the 50% bullish retracement level. A weekly closing of the price above this level will ultimately lead this pair towards the 38.2% Fibonacci retracement level. This level is very crucial since a valid break of this level will confirm the end of a recent bearish rally in the USDJPY pair.
On the downside, we need to break below the critical support level at 104.65 to establish fresh selling pressure to this pair. A daily closing of the price below the critical resistance level at 104.65 will result in a sharp decline. This will eventually lead this pair towards the low of 19th June 2016.This level is going to provide some solid support and the leading investors will be looking for bullish price action confirmation signal to execute fresh long orders. Considering the weekly and daily chart analysis, we are expecting a strong bullish surge in the USDJPY pair. However, we might see a small drop towards the broken trend line support near 106.42