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USD/JPY - Be Ready for the Bullish Breakout

USD/JPY has been consolidating since making a new 2014-high at 110.08 at the end of September. A failed attempt to break this level is now followed by a drift back to 107.00. 

The 4H chart shows us that this 106.80-107 area was a previous support area, and the latest 4H candle is so far showing support here. 

USD/JPY 4H Chart 10/14

(click to enlarge)

For the most part, we should see USD/JPY as bearish in the short-term. However, knowing that this is going against a bullish market that traces back to 2012, we should not be caught surprised if there is a bullish continuation attempt. 

Note a support/resistance pivot at 107.57. If USD/JPY breaks above 107.60, it would clear this pivot, push price back above the 200-period SMA in the 4H chart, and break above October's falling trendline. This would be a bullish continuation signal, but will see a challenge in the 108.50-109 area. A break above 109 could revive the bullish outlook, especially if the 4H RSI pushes back above 70, which would show bullish momentum.

Otherwise, if we do get a bullish continuation attempt, and price holds below 109, there could still be further downside risk even though the trend since 2012 is still bullish. The next level to monitor for support below 106.80, will be the 105.44 level, which was the previous 2014-high before it was broken in September.