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Are the tides really turning for the yen? USD/JPY has just broken above a descending triangle and I think we could be looking at a long-term uptrend in the making. What do you think?

I’ve been watching USD/JPY all week and, on a technical basis, the pair has broken above a descending triangle, the top weekly ATR, and most likely the August highs. As in the lyrics in High School Musical, this could be the start of something new! A new uptrend, I mean.

USD/JPY: Daily Forex Chart
USD/JPY: Daily Forex Chart

Fundamentally it makes sense that traders can’t get enough of the dollar lately. Employment-related leading indicators like the ISM non-manufacturing PMI and yesterday’s initial jobless claims all hint at a strong NFP release today. If it does print strong numbers, then there will be increased pressure on the Fed to raise its interest rates by December (or earlier).

On the other side of the pair, Japan’s officials are throwing everything but the kitchen sink in the hopes that their monetary easing will boost consumer prices. The latest in the line of the BOJ’s programs is the “QQE with Yield Curve Control” where Kuroda and his gang scrap the limit on asset purchases in favor of suppressing the yield on Japan’s long-term government bonds. In short, we should buckle up for more easing down the road.

I think the best entry opportunity presented itself earlier this week when the pair went past last week’s highs. The triangle had been broken then and sentiment was strongly in the dollar’s favor. As it is, I’m looking for a retracement back to the 102.00 area for another entry opportunity.

See, I expect the daily time frame’s 100 SMA, an overbought stochastic signal, and a bit of profit-taking from today’s NFP release to provide a bit of resistance and push USD/JPY back down. If the NFP report does print to the upside though, and pushes the pair beyond the 100 SMA, then I’m also prepared to enter a small long position and brace myself for a longer-term uptrend.

What do you think? Will USD/JPY encounter some bears around the 100 SMA and 104.00 major psychological area? Where would you enter if you’re trading this setup?

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