It decisively breaks key resistance, but bearish signs persist

• USD/JPY breaks decisively above a critical level in an uptrend.
• It may also have completed a three-wave correction of the medium-term downtrend with more bearish implications.

USD/JPY is breaking apart and closing decisively above both the long-term trend line and the key upside obstacle in the form of the October 3 high of 147.24. This lends credence to the bullish view and suggests a possible short-term uptrend continuation to a tentative target at the next key resistance level of 149.40, the August 15 high.

USD/JPY Daily Chart

Momentum is mostly bullish since the August low, and the MACD (Moving Average Convergence Divergence) indicator has steadily converged with price in September and is now in positive territory.

A close above 149.40 would provide further confirmation of a short-term uptrend extension higher, with the next potential target at 151.09 and the 200-day simple moving average (SMA).

However, the bullish enthusiasm should be tempered by the possibility that USD/JPY may have formed a three-wave “abc” corrective medium-term downtrend pattern during July. If so, the pair may begin to decline again as the long-term bear cycle begins to set in. However, it is still too early to tell with confidence and the price action itself is yet to highlight any weakness.

A close below the 50-day SMA at 145.24 would likely indicate a resumption of the summer medium-term downtrend. Such a move is expected to reach wave B lows around 141.72.