Further advance for USD/JPY

AFTER consolidating in a 6.5-year long triangle formation, the USD/JPY displayed strength and broke out from the long-term upper resistance of the pattern in March 2021. Since the breakout, the currency pair's bullish momentum was validated with a successful retest of the resistance-turned-support level. We hold the view that the USD/JPY currency pair will continue to advance based on a few observations, which we will elaborate on in this article.

Apart from the breakout of a long-term triangle pattern - which is a bullish reversal sign - we can also identify an inverse head-and-shoulders pattern that the pair has successfully completed and signifies it is poised for further gains.

The inverse head-and-shoulders pattern spanned April 2020 to October this year. It can be identified by 3 bottoms in prices: the first and third being almost equal in depth, with the middle "head" being the deepest. The 3 bottoms were bounded by a neckline, which served as the resistance to the pair. A break above the neckline in October marked the completion of the bullish reversal pattern, setting a technical target above the neckline with a height equivalent to the depth of the "head".