FxWirePro: USD/JPY recovery after gap-up open rejected at 5-DMA, break above to see further upside

• Easing North Korean tensions saw fading demand for traditional safe-haven assets like the yen.
  
• USD/JPY opened with a bullish gap open and hit session highs at 108.56. But failed to hold gains above 5-DMA.
  
• The major has pared some gains but holds above 108 handle, trading at 108.36.
  
• Bullish divergence keeps scope for upside. Decisive break above 5-DMA could see gains till 20-DMA at 109.38.
  
• Technical studies are bearish, the pair has breached major trendline support at 108.40 and we see scope for test of 61.8% Fib retrace of 98.787 to 118.662 rally at 106.37.
  
• Key US inflation readings (due Thursday) will be in focus for fresh clues over the timing of next Fed rate hike move and eventually further direction in the pair.

Support levels - 108, 107.77 (Nov 15 2016 low), 107, 106.37 (61.8% Fib retrace of 98.787 to 118.662 rally)

Resistance levels - 108.40 (trendline support turned resistance), 108.52 (5-DMA), 108.72 (50% Fib), 109.46 (20-DMA)

Call update: Our previous call (http://www.econotimes.com/FxWirePro-USD-JPY-hits-2017-lows-at-10804-bias-lower-good-to-go-short-on-rallies-889954) has hit TP1&2.

Recommendation: Watch for breakout above 5-DMA for further upside.

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