USD/JPY Climbs on Improving U.S. Job Data

USD/JPY (daily chart as of February 6, 2014) traded higher following improved US job data, with the initial jobless claims declining by 20K to 331K, dropping for the first time in three weeks and raising expectations of a better payrolls report due on Friday.

The pair’s recent bounce occurred around the 100.60 support level (September 2013 high) and also around the projected target of a short-term “head and shoulders” pattern, shown on the chart with pink rectangles (the “left shoulder” (LS), the “head” (H), and the “right shoulder” (RS)).

The candlesticks of February 3 and 4 were a potential bullish “harami” pattern (gray rectangle on chat), with the first long bearish body engulfing the entire small bullish body of the second candlestick. The pattern was strengthened by an up session yesterday, followed by another possible bullish candlestick in the making. A strong close today would confirm the reversal pattern.

Note that current price is testing 101.75 (January 26 low), and still under pressure below the daily EMA 100. If the pair is unable to clear those resistance levels, it could face a potential leg down to test the daily EMA 200, which has been serving as strong support in January (arrow on chart).

Support levels below:
1st support: 100.75/60 (February 4 low/September 2013 high)
2nd support: daily EMA 200
3rd support: 99.00 (previous multiple highs)

Resistance levels above:
1st resistance: daily EMA 100
2nd resistance: daily EMA 50
3rd resistance: 103.45 (January 28 high)