USD/JPY: technical forex analysis shows possible short-term acceleration towards 116.48 (Merrill Lynch)

Merrill Lynch believes that the USD/JPY will rise in the short term and presents a technical forex analysis.

"We believe that the weakness of the JPY has resumed and will manifest itself in 2017. We estimate that the USD/JPY will move up in the direction of 120.

The risk/benefit ratio has changed from buying JPY to selling JPY. Multiple strengths supported the prospect of a stronger yen this year, but the strongest argument was positioning. Potential buyers of USD/JPY have virtually disappeared, while potential sellers have accumulated. This pushed the risk/benefit in favour of buying JPY, but we believe this state of things has reversed this summer.

Technical analysis remains bullish for the USD/JPY and shows that the pair formed a triple bottom in Q3 2016 and initiated a bullish trend in Q4 2016. Measurements of the trend line break in November 2016 suggest that the USD/JPY will initially reach 116.48.

We estimate that there is potential for the pair to test important technical levels in 2017, such as 121.15, 123.75, and that a move towards the high of 2015 at 125.85 cannot be ruled out."