USDJPY rallies for the third day on geopolitical uncertainty, higher US inflation

USDJPY advances for the third straight day, as stalling peace talks in the Middle East fuel uncertainty and boost dollar’s safe-haven appeal, while fresh rise of inflation in the US adds to Fed’s hawkish stance that underpins the greenback.

Fresh advance emerged after USDJPY’s strong fall from Japan’s authorities’ interventions, ran out of steam that resulted in multiple failure at the base of thick daily cloud and formation of bear-traps, which contributed to reverse of direction and subsequent strong bounce.

Bulls cracked important resistances at 157.90 zone (May 5 lower top / daily Kijun-sen / 50% retracement of 160.72/155.02 fall) with break and close above this barrier needed to generate fresh bullish signal and strengthen near-term structure, which is still fragile (14-d momentum is in negative territory / Stochastic is overbought and DMAs in mixed setup) and warns that recovery may face increased headwinds.

On the other hand, Doji reversal pattern is forming on weekly chart and provides support, as weekly studies are predominantly bullish.

We will continue to closely monitor developments on geopolitical front, which strongly influences market action, as well as reaction at key 157.90 barrier.

Firm break higher to open way for further recovery and expose targets at 158.55 (Fibo 61.8%) and more significand daily cloud top (158.81).

Conversely, failure to clear 157.90 pivot at first attempt would probably keep the price on hold for consolidation, with 100DMA (157.36) marking significant support, which should hold dips to keep near-term bulls in play.

Res: 157.90; 158.25; 158.55; 158.81
Sup: 157.50; 157.36; 157.10; 156.72