USD/JPY compresses below resistance
USD/JPY appears to be gearing up for a significant move. The currency pair has established firm resistance around 162.5 and has recorded a series of higher lows since 3 July.
That leaves the pair compressing into an increasingly tight range, forming either a symmetrical triangle or an ascending triangle. Both patterns are often treated as continuation patterns, suggesting that USD/JPY could break out and move significantly higher if resistance gives way. A failure, however, could send the pair back towards 160, and potentially lower.
Momentum signals are mixed but improving
Longer-term upward momentum appears to be strengthening, with the relative strength index forming a series of higher lows since the end of January. In the shorter term, however, USD/JPY has remained below resistance for several weeks, while its RSI has begun to trend lower.
That makes the current compression important. The longer-term momentum backdrop still points higher, but the pair needs to resolve the short-term stall before the bullish setup can be confirmed.
USD/JPY daily chart
USD/JPY, daily. Sources: TradingView, Michael J Kramer.
