USD/JPY is consolidating inside a pennant after a sharp rally from the September low, with the pair squeezed between converging trendlines near 157.53-157.70 on the upside and 156.92 on the downside. The direction of the eventual break, not the pattern itself, will signal whether the rally resumes or the correction deepens.
The flagpole behind the pattern
USD/JPY's rally began near the September low around 152.93 and reached the 158.04 area, a gain of more than 500 pips that established the initial bullish momentum. After hitting that high, the pair corrected toward 156.65 before rebounding.
Since then, the price has traced a series of lower highs and higher lows. Those converging levels have formed the pennant now visible on the hourly chart, a pattern that frequently resolves in the direction of the original move, though the breakout itself is what confirms the next direction.
What confirms the bullish case
For buyers to regain firmer control, price needs to clear the pennant's descending upper trendline, currently near 157.53-157.70. A break alone is not enough; the pair must also hold above that line, since a quick push through followed by a reversal back inside the pattern would raise the risk of a false breakout.
If buyers manage to break and stay above the upper boundary, the next targets include 157.90-158.04, the 200-day moving average at 158.419, and the 38.2% retracement at 158.55. Beyond that, the 100-day moving average sits near 159.58. Moving above 158.04 would take price above the top of the flagpole and confirm the broader rally is extending.
What would weaken the pattern
A break below the pennant's rising lower trendline would weaken the bullish read. The first area to watch sits around 156.92, followed by a support cluster near 156.77, 156.65 and 155.77.
The 156.65-156.77 zone carries particular weight, combining the rising 100-hour moving average, the 50% retracement and the lower edge of the recent consolidation. A sustained move below that cluster would suggest the pennant has failed and sellers are regaining control.
The earlier rally still gives buyers the edge heading into the break, but the pennant itself decides nothing until price closes outside it.
Source: Investinglive
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