USD/JPY has been climbing slowly inside a rising channel on its 4-hour time frame, and is currently testing the bottom.

In addition, price has formed a bullish divergence with higher lows while stochastic made lower lows, suggesting a continuation of the climb.

Stochastic is already moving up but hasn’t reached the overbought zone, which means that dollar bulls still have enough energy to push the pair up, at least until the middle of the channel around 100.00.

A buy order at the top of the recent consolidation and a stop below the channel could offer a good reward-to-risk ratio. Aiming for the middle of the channel is a reasonable target for an end-of-the-week trade, as the rally could gain traction towards the U.S. session. A longer-term trader could aim for the top of the channel or the previous highs around 101.50.

By Kate Curtis from Trader’s Way