Brighter prospect seen for USD/JPY

AS we approach the end of 2019, during which the Federal Reserve slashed rates three times over the course of a year, markets remain cautious towards whether there would be more downside risk for the USD next year. The series of Fed rate cuts that started since July largely caught markets by surprise as the general consensus at the start of 2019 suggested a possibility of the Fed raising rates gradually. Therefore, the drastic turn of events throughout the year placed strain on the USD, and this was most evident in the USD/JPY pair. However, for the new year, there appears to be light at the end of the tunnel, and technical indicators are pointing towards a brighter prospect for the USD/JPY pair.

Firstly, a "golden cross" candlestick pattern has occurred. This phenomenon occurs when the short-term moving average (50 EMA) crosses above the long-term moving average (200 EMA), this is deemed to be a bullish signal. In addition, prices have been well above the Exponential Moving Averages (EMAs), and the distance between them have been widening. This affirms that buying strength is present and that an upwards trend is on the horizon for the USD/JPY pair.

Secondly, an uptrend line has been forming since Aug 12. To date, prices have tested the support levels multiple times, and have been showing higher highs and lower lows. Using Fibonacci retracement, drawn from the April 24 high at 112.19 to the Aug 26 low at 104.45, it is noted that prices are currently at the 61.8 per cent resistance level. Should prices break above current levels, its immediate resistance will be at 110.52, at the 76.4 per cent Fibonacci level, presenting a 1.02 per cent upside potential. The Fibonacci retracement has been accurate thus far, with the levels proving to act as strong support and resistance points. Therefore, as there are no obvious signs of reversal, it suggests that prices would still have a tendency to trend higher.