On 15 December, we highlighted that USD/JPY was sliding towards a key support area near the lower boundary of its ascending channel.

Since then (as shown by the arrow), the pair has reversed higher, gaining around 1.5% and moving close to an important high set last month.

Notably, the advance has occurred despite two bearish factors:
→ last Friday’s interest-rate increase to 0.75%, the highest level in 30 years;
→ the ongoing risk of currency intervention aimed at supporting the yen.

It appears that the rate hike had already been priced in, while traders focused on the relatively dovish tone of the Bank of Japan’s comments following the decision. At the same time, the threat of intervention is largely being viewed as rhetorical rather than imminent.

Technical Analysis of the USD/JPY Chart

From a technical perspective:
→ the decline since 20 November resembles a bullish flag correction pattern;
→ the forceful breakout above its upper boundary suggests growing confidence among buyers in a continuation of the uptrend, after successfully keeping the pair within the broader channel that has been in place since September.

It cannot be ruled out that:
→ in the short term, the channel’s median line (which previously acted as resistance) could serve as the next upside target;
→ support may be provided by the acceleration zone — a sign of buyer-side imbalance — between 156.15 (the breakout level) and the 157 yen-per-dollar mark.

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