USD/JPY bulls kicked off October on a high note, reaching fresh 2018 highs of 114.06. Following dips in Japan’s Q3 Tankan survey and September’s manufacturing PMI, the pair eventually shook hands with its 114 handle on the H4 timeframe.
As is evident from the H4, price remains in a consolidative state just south of 114 at the moment, with the H4 RSI exploring higher ground in overbought territory.
Can 114 hold up to further bullish momentum?
In terms of the daily chart, technicals suggest we’re heading higher. In recent sessions, supply at 113.91-113.09 was engulfed, potentially clearing the pathway north towards Quasimodo resistance at 114.50. On the other hand, though, traders are also urged to consider weekly action, which happens to be crossing swords with the lower edge of a supply zone at 115.50-113.85.
Note, the aforementioned daily Quasimodo resistance is sited within the lower limits of the said weekly supply.
Areas of consideration:
From a technical standpoint, the radar is firmly fixed on a possible short from the daily Quasimodo resistance mentioned above at 114.45. With stop-loss orders positioned above the apex of this Quasimodo formation at 114.73 (114.75 to include spread/slippage), this equates to a 30-pip stop. The first take-profit target from 114.45 rests at the 114 handle on the H4, offering reasonable risk/reward: 1.5 times the position risk.
Today’s data points: FOMC member Quarles speaks; Fed Chairman Powell speaks.