USD/JPY Price Analysis: Still struggling for a firm near-term direction

• USD/JPY remains confined in a one-week-old trading range.
• The technical set-up seems tilted in favour of bullish traders.

The USD/JPY pair extended its sideways consolidative price action on Wednesday and remained confined well within a one-week-old trading band below 200-hour EMA.

The subdued/range-bound price action seemed to have constituted towards the formation of a rectangle on short-term charts, indicating indicates a brief pause in the trend.

Given last week's sustained break through a 3-1/2 week old descending trend-line resistance, the rectangle might still be categorized as a bullish continuation pattern.

Meanwhile, technical indicators on hourly charts have just started gaining some positive momentum and add credence to the constructive outlook amid improving risk sentiment.

However, neutral oscillators on the daily chart haven't been supportive of any firm near-term direction and warrant some caution before placing any aggressive bullish bets.

Hence, it will be prudent to wait for a sustained break through the mentioned trading range, which should assist traders to determine the pair's next leg of a directional move.

Some follow-through strength beyond the 108.00-108.10 region might be seen as a key trigger for bulls and set the stage for a move towards reclaiming the 109.00 mark.

Conversely, a convincing break below the 107.30 support might prompt some technical selling and accelerate the fall back towards monthly lows, near the 106.95-90 region.

USD/JPY 1-hourly chart

Technical levels to watch