US Dollar, Japanese Yen, USD/JPY – Technical Outlook:

• USD/JPY has rebounded from key support.
• A resumption of the multi-month uptrend looks less likely
• What is the outlook and what are the signposts to watch?

USD/JPY MEDIUM-TERM TECHNICAL FORECAST – NEUTRAL

USD/JPY’s break above last week’s high may have reduced imminent downside risks, but it doesn’t necessarily imply a resumption of the multi-month uptrend. On the contrary, USD/JPY could be set for a range-bound phase in the coming weeks.

USD/JPY, off 137.70 low on November 15, on Monday, broke above a ceiling on a horizontal trendline from last week at about 140.80,confirming scenario 1 outlined on November 13. This follows a rebound from a horizontal trendline from July, at about 139.50, including the 89-day moving average. The pair is now testing a hurdle at the November 11 high of 142.50, the 89-period moving average on the 4-hour and the daily charts. This is not too far from 143.00-143.15 (the 50% retracement of the November 7-11 week’s decline).

USD/JPY 240-minutes Chart

Chart Created Using TradingView

If last week’s rebound were to extend, it is critical that USD/JPY, at minimum, breaks above 143.00-143.15. Often times when a big/wide-body candle appears on a chart, the 50% retracement of that candle tends to serve as key resistance from a trend perspective. Big moves are a reflection of greater conviction amongst market participants and if the market is unable to recover half of the move, it can imply further weakness.

USD/JPY Daily Chart

Chart Created Using TradingView

Furthermore, for a retest of the October high, USD/JPY needs to rise above 147.50 (the high of the November 7-11 week). Givenoverbought conditions and fatigue on higher timeframe charts, the odds of USD/JPY breaking above 147.50 appear to be low. Indeed, it is quite possible that USD/JPY could settle a 137-147 in the coming weeks.

On the other hand, if USD/JPY fails to clear 143.00-143.15, then the chance of a retest of 137.70 would not only grow but also raise the odds of a drop toward the 200-day moving average (now at about 133.50).

— Written by Manish Jaradi, Strategist for DailyFX.com