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Forex: USD/JPY completes ‘pennant’ pattern on daily chart, further gains ahead?

The USD/JPY finished the day sharply higher, up 169 pips at 100.63. This was the first time the pair has traded above the 100 level in four years. The pair is adding to gains during the Asia, up 27 pips at 100.90.

According to Sean Callow of Westpac Global Strategy, “An unexplained surge in the USD against most currencies was the NY highlight, most notably USD/JPY punching through 100 for the first time since 14 Apr 2009. The surge occurred during the NY afternoon, starting with USD/JPY and then fanning out to other pairs. USD/JPY rose about 15 pips on the better than expected jobless claims, to 98.90, eased back to 98.80 for a while then gently pushed up to 99.40. Several hours later it nudged up to 99.85, the launching pad for the surge through 100.00, triggering stop loss order en route to a high of 100.79.”

He went on to add, “Of course there was a desperate scramble to attribute the move to a logical news catalyst but no explanations were convincing. There was talk of a looming article by WSJ’s Hilsenrath about the Fed planning to taper its QE program. But while Hilsenrath is no doubt very flattered by the talk, he did not write anything new on the WSJ site and indeed has not done so since last week’s FOMC meeting where of course the Fed flagged the possibility that it might even increase QE if needed. Others chattered about supposed plans for China to increase its US Treasury holdings, an even less plausible “explanation”.

From a technical perspective, the pair completed the ‘pennant’ continuation pattern with a daily close above 99.40. The pattern has a measured move price target of 103.55, and should help to keep pullbacks shallow in the coming sessions. Initial support can be found at 100.50 (the 9dma on 1 hour chart), followed by 100.00 (previous resistance, now support).

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