USDJPY broke above the ascending triangle resistance on its 1-hour chart and confirmed the bullish momentum for the pair. 

This occurred after the stronger than expected US NFP report was released, increasing speculations for a Fed rate hike sometime during the middle of the year.

The chart pattern is approximately 300 pips tall, which means that the resulting breakout could be of the same size. This could push USDJPY up to the 123.00 mark, well beyond the previous year highs.

Price could still pull back to the broken triangle resistance near the 120.50 minor psychological level before resuming its climb. A sharper correction could last until the triangle support at the 120.00 major psychological level while a break below this area could indicate a reversal.

Stochastic is pointing up, indicating that price is ready to head north sooner or later. Earlier today, Japan printed a couple of weaker than expected reports, namely its current account and final GDP. The current account surplus came in at 1.06 trillion JPY versus the projected 1.16 trillion JPY figure while the GDP was downgraded from 0.6% to 0.4%.  There are no major reports due from the US economy today.

The path of least resistance is to the upside since the Federal Reserve is moving closer to hiking interest rates while the Bank of Japan might need to implement further easing. Data from the Japanese economy, particularly that of inflation and spending, have consistently come in weaker than expected for the past months. On the other hand, data from the US have shown that the economic recovery is gaining traction.

US retail sales data are up for release later on this week while Japan will print its tertiary industry activity index. These could pose event risks for the trade, with weak data from the US combined with strong data from Japan likely to spur a potential reversal.

By Kate Curtis from Trader’s Way