Over the last few weeks we talked about the long-term monthly inverted head and shoulders pattern in USDJPY and the bullish it recently gave when price broke out of the neckline resistance at 124-125. Price continues to climb higher and is now moving above 130-131.
USDJPY target as we mentioned in previous posts is found around 170, according to the inverted head and shoulders pattern and the height of the head. The upside move should be equal to the head's height and that is how we get 170. In the monthly and weekly charts the RSI has reached overbought levels but has not provided any bearish divergence. In the Daily chart we observe a bearish divergence but this does not constitute a reversal signal. A pull back is of course justified as it is not healthy for bullish trends to see price rise in a parabolic pattern. Usually parabolic patterns have strong and ugly reversals. So traders need to be very cautious.
