Hello, dear traders!

Last Friday was the last trading day of January. Today, we are going to start reviewing one of the most popular currency pairs among traders, USD/JPY, in the largest time frame.

Weekly chart

Thus, a bullish engulfing pattern occurred on the monthly chart at the end of January 2021. Its body completely overlapped the body of the previous bearish candlestick. Based on the candlestick analysis, the given pattern is considered to be a reversal one, as well as a stronger one. Consequently, the bullish trend on USD/JPY is likely to extend during trading in February. According to the monthly chart, the pair has already started its rally. At the moment, the currency pair is moving in the bullish trend near an important technical and psychological level of 105.00. Obviously, the key task for bulls will be to close much higher than the indicated level at the end of February. Meanwhile, bears have an even more challenging task to do. In order to resume the downward trend, they need to break the strong support at 102.60 and close below such a steady technical level at the end of February. Based on the largest time frame, the USD/JPY pair is likely to extend its rally.

Monthly chart

The USD/JPY consolidated at the end of last week as well as at the end of the previous month. As we can see, two previous doji candlesticks indicate that bears lost their strength in the market. Besides, the red Tenkan line of the Ichimoku Cloud indicator is providing considerable support for the price. Another important moment is that the pair has broken through the strong technical level of 104.40. In fact, it is also a steady resistance level that has not allowed the price to go higher for a long time. Currently, the pair is trying to break through the important psychological level of 105.00. It will become clear whether the price can break through it after the release of the US labor market statistics on Friday. Let me remind you that USD/JPY is perhaps the most sensitive currency pair to such an important report as Non Farm Payrolls. If bulls break through the 105.00 level, their next target will be seen in the price range of 106.00-106.11. Apart from that, the 50-day moving average is located there. Also, there is the resistance level slightly above it.

From my point of view, one should consider buying the USD/JPY pair at the moment. The best time to enter long is after short-term downward pullbacks and when the price rate gets more favourable. In addition, you should consider opening long positions on USD/JPY after it falls to the 104.70-104.40 price range where there is also a strong technical level and bears' broken resistance level. Earlier and riskier buy deals will be possible near 104.85. If the 105.00 mark is broken in shorter time frames and the price consolidates above it, one should try to sell the instrument during a pullback to 105.00. Nevertheless, I assume the safest and most profitable way to buy USD/JPY is from lower levels. If there are any reversal patterns or Japanese candlesticks below 105.00 in the daily or shorter time frames, one can sell the pair with the targets set in the area of 104.70-104.40.

Have a nice trading day!