USD/JPY pulls back after record rally

<p>USD/JPY (daily chart shown below) has finally made a significant pullback after a record rally that pushed the currency pair up from a low of […]</p>

USD/JPY (daily chart shown below) has finally made a significant pullback after a record rally that pushed the currency pair up from a low of 105.18 in mid-October to a high of 121.83 earlier this week. This steep climb represented a rise of more than 15% in less than two months.

The noted high of 121.83 that was established this week marked a new seven-year high for USD/JPY, and fell just slightly short of its upside resistance target at 122.00 before retreating.

Aided by exceptional US dollar strength and corresponding yen weakness, USD/JPY has traded in a significantly steeper trend than other major currency pairs in the past several months.

The bullish trend accelerated at the end of October, when the currency pair spiked above major 110.00-area resistance. Upside momentum then followed through with a bullish run that broke above successively higher resistance levels, including 114.50, 118.00, and 120.00, without providing any substantial pullback until now.

 
USDJPY technical chart

 

While the overall trend bias for USD/JPY still remains bullish, with the recent over-extension of USD/JPY’s rise, a pullback had been overdue.

The current pullback has pushed the pair down to hit key support around the noted 118.00 level, as expected. Any additional correction could target further downside around the major 114.50 support area.

In the event of a resumption of the bullish trend after the current pullback, key upside resistance targets continue to reside around 122.00 and 124.00.

 

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