The dollar is extending the rebound this week from the previous two weeks. The greenback is broadly stronger, with EURUSD now trading below 1.07, GBPUSD below 1.20, and USDJPY above 133.00.

The latest round of strong US economic data seems to be the catalyst for the dollar rebound. Given the already sharp downside correction over the past 4 months since October, now there is scope for some USD gains. The especially strong NFP report (over 500K job gains) and higher-than-expected GDP and CPI reports should keep Fed communication hawkish. A new round of hawkish Fed talk should help to lift the USD further.

The charts show important technical breakouts on USD pairs. Of those, the cleanest breakout appears in the USDJPY, which confirmed the bullish shift with a clear move above 131.00 - 132.00.

USDJPY was trading in an orderly downward channel from November to January. The recent sharp rebound clearly broke this channel and turned the technical picture bullish here. 

This development suggests USDJPY can move to the 135.00 area at least. A strong Fibonacci zone is located around 136.50 - 137.00. Additionally, the 100-day (orange) and 200-day (red) moving averages are located here. So, overall this area is strong resistance which could act as a pulling force for USDJPY.

Sellers may not come into the market until this area is reached as there is no strong resistance before it, and all previous zones have now been broken.

USDJPY Should Continue Higher Above 135

To trade this setup, we are switching to the lower, 4-hour timeframe. This will give us a detailed view of the action and can allow for more accurate entry and exit levels, and with that, more attractive risk-reward.

We can see the breakout of the channel here, and we can also see that USDJPY is currently overbought on the 4H timeframe. It is also near a moderate, intraday resistance around the 134.00 level. This means some small downside correction from here is possible. If such a small correction occurs, it will be our chance to enter long. The 133.00 zone looks like the best level on the chart to look for a bounce in such a scenario. 

A bounce can also happen before 133.00 is reached. In this case, the 133.50 zone could be where USDJPY will turn. Nonetheless, a bullish signal is likely to occur in this scenario too. If such a bullish signal appears around 133.50, then it would be an appropriate long entry as well.

Trade Plan

Entry:

• Look for a bearish break of the support line (0.99 zone);
• Short entry on confirmed bearish breakout

Stop:

• Above breakout point, 
• or above the most recent swing high (currently around 1.01)

Target:

• 1st - 0.97
• 2nd - 0.95