The US Dollar (USD) rallied broadly against the Japanese Yen (JPY) yesterday after dipping below the 118.50 level and managed to close around 119.18 in the form of a bullish pin bar. The technical bias remains bullish due to a Higher High on the daily chart.
As of this writing, the pair is being traded near 119.23. A support may be seen around 119.00, the psychological number ahead of 118.32, the low of the yesterday’s bullish pin bar as demonstrated in the following chart. A break below the 118.00 handle will invalidate the current bullish formation and push the pair into deeper selling pressure, validating a dip towards the 115.00 support area.
On the upside, the pair is expected to face a hurdle near 119.40, the high of the bearish pin bar on four-hour chart ahead of 120.00, the confluence of psychological number as well as 38.2% fib level and then 120.77, the 23.6% fib level. The technical bias will remain bullish as long as the 116.76 support area remains intact.
The US Bureau of Economic Analysis is due to release the Gross Domestic Product (GDP) report for the world’s largest economy today in the US morning session. According to the average forecast of different economists, the US economy grew at the annual pace of 2.4% by the end of fourth quarter as compared to 5.0% in the same quarter of the year before. Generally speaking, higher GDP figure is considered positive for the economy thus a better than expected actual outcome will be seen as bullish for USDJPY and vice versa.
Considering the overall technical and fundamental outlook, buying the pair near the 118.80-119.00 region appears to be a good strategy in short to medium term. The trade should however be stopped out on a daily closing below the 118.00 handle.