USD/JPY: On The Cusp Of A Major Breakout, All Eyes on 114.50

The pair is shaping up to break a major weekly resistance at 114.50. As of today, Thursday (Oct 4th), the dominant flows in the market seem to suggest that a bullish resolution may be nearing.

The close at the highs by 5pm NY is the first clue of the sheer conviction by long accounts. When a candle has such as a strong close, it communicates the refusal to take profits, hence why further upside should be expected.

The upward impulsive move has come in tandem with a spike in both the DXY and the US vs JP 10yr yield spread, which indicates an environment driven by broad-based USD strength.

The point of control has been left behind at 113.80 vicinity, which when combined as part of a bullish content (higher high and higher lows), tends to provide further support to the pair on possible setbacks as short finds the opportunity to bail out of their position at a minimal loss while an army of longs are expected to regroup to resume the uptrend.

The decreasing volume on the test of 114.50, as seen, seems to suggest that lower grabs of liquidity may be expected, although given the potency of the run-up, expect pullbacks to be fairly shallow in nature. Any retest of 114.00 should be an excellent chance to rejoin the trend should market conditions at the time be conducive to play the trend. As things stand, it looks highly unlikely for the current trend to reverse before the US NFP on Friday (net catalyst to determine direction).

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