The double top setup that was looking promising turned out to be a dud. Prices didn’t manage to break the 96.8 floor, but instead formed a Morning Star on 1st May with 2nd May bullish candle confirmation, setting the tone for a bullish reversal for the rest of the week. Bulls didn’t disappoint, riding on strong risk appetite to send price above 99.0, closing near to least week’s high. With the clearing of 98.5 interim support/resistance, we are forced to accept that the double top setup may be invalidated, but as long as price stay below 100.0, the possibility of a Triple Top or a sideways consolidation trade between 96.8 – 100.0 remains possible.
From a Technical perspective, the rebound from 97.0 towards 100.0 has not ended with no evidence of bullish momentum stopping. Stochastic indicator remain bullish after a trough has been formed with readings still a fair distance away from the Overbought region, making a push towards still in the cards.
Short term chart shows price rallying during late Asian trading session. Stochastic readings are currently forming an interim trough which puts price in a good position to break above Friday’s high. Should the high level gets broken, we could potentially see bullish acceleration higher towards 100.0. Failure to break the 99.3 level will reopen support just above 98.80. 99.5 – 99.75 may also act as soft resistance above current levels, which may slow down any rally towards the much sought after triple digits.
Fundamentally, with risk appetite steadily rising (due to S&P 500 clearing 1,600 and DJIA tagging 15,000), USD/JPY bulls will be able to continue its rally towards 100.0. As currently rally is purely driven by sentiments, it remains to be seen what may happen once the bulls managed to hit 100.0. Will they be satisfied and start to close their positions, resulting in a pullback, or would it inspire yet another bullish push? Do not take everything by granted and keep a close eye around 100.0 (if we reach the levels that is) as it will be a significant milestone that may determine the rest of direction for USD/JPY in 2013.
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