The US dollar versus the Japanese yen currency pair is consolidating after confirming the 105.50 support level. Given the strong retracement, expectations are for an extension towards the 108.00 psychological level.
The pair is in a consolidative phase limited by the important support area of 105.50 and the 106.92 resistance, the latter being the technical correspondent of the 107.00 psychological level.
Noteworthy is the strong retracement from the 104.44 low, which is printed by a strong bullish candle that confirmed the psychological level of 105.00, closed above the 105.50 level (105.52 on the chart), and crystallized a piercing pattern in relation with the previous candle, August 23, respectively.
So as long as the piercing pattern is not invalidated, the situation is in bullish hands. Such an invalidation would be recognized as price oscillations under the 105.00 psychological level, a behavior that also has the potential to switch the role of 105.00 from support to resistance. But for the time being this is a low probability scenario.
So, as long as the price remains above 105.50, confirms it as support or falsely pierces it, movements towards the north are a natural unfolding, the first target being the 108.00 psychological level which, alongside the upper line of the descending channel and the lower line of the channel that encloses the ascending rectangle, forms a boundary that could, at least, temper the appreciation.
After retracing above the 105.51 level and confirming it as support, the price etched a new upwards leg and then corrected, thus drawing the ascending channel. As it may serve as a guide for the immediate development, the important reference points remain 105.51 and 107.08.
If the price revisits 105.51, a new confirmation will render 107.08 as a first profit taking area, with 108.49 being the second. Confirmations of 107.08 as resistance — if any — should be treated with a lot of discretion, as the main market profile is bullish. On the other hand, a confirmation of 107.08 as support will target the aforementioned 108.49 area.
Levels to keep an eye on:
D1: 105.52 106.92 108.12
H4: 105.51 107.08 108.49
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