Forex Technical Update

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USD/JPY 1H Chart 2:20PM EDT 6/5/2012

USD/JPY

The USD/JPY picked up some bullish momentum during the US session pushing above the initial range established after the poor NFP release on 6/1. Against my expectations that the USD would be pressured against the JPY due to an increase of QE prospect while the BoJ has stopped its bond purchase program, the USD/JPY did not fall further and instead rallied after a couple sessions of consolidation.

The 1H chart shows the market pushing above some recent resistance pivots and nearing the 79.00 handle. The 1H RSI reading pushed above 60 and tagged 70 showing some momentum pickup in the short-term.

USD/JPY 4H Chart 2:25PM EDT 6/5/2012

USD/JPY

When we look at the 4H chart however, we see that this rally is still within a bearish market. There is a declining trendline that goes back to the 3/21 high near 84.05. We also see a slightly more bearish trendline connecting highs from 5/22 and 5/30. For a bullish signal, it will be necessary to break the higher one, which is probably near 79.20, while the lower one is roughly at 79.00.

For now, the market is still in a bearish market, especially with the RSI in the 4H chart holding below 60. If it can turn down and push below 40, we should be seeing a bearish continuation, and the 77.64 low should be threatened, with 77.00 as the next psychological support to target.

Bernanke's highly anticipated testimony on Thursday will be a key risk event for the USD/JPY. It is expected that stimulus measures will be considered in light of 3 straight months of sub par employment data. Inflation might be a deterrent at the moment, but still Bernanke is expected to give us an idea whether there will be QE3, or something like Operation Twist, with the previous round of it set to expire this month.

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Fan Yang CMT is the Chief Technical Strategist, trader, educator and a of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.