Read More Next stop for dollar-yen: 120?
Starting June 2013, the dollar-yen traded within a broad sideways pattern between 97 and 106. A support and resistance level developed in the middle of that trading band near 102.
The width of this trading band allows us to set upside targets for the current rally breakout.
The first projection target for the breakout above 106 is set at 110. This was achieved and the market retreated and tested 106 as a support level. The rebound from 106 pushed above 110 and rapidly reached the next trading band projection target near 114.50. Traders will now watch for consolidation around this level and a potential retreat and retest of 110 as a support level.
Read MoreDollar-yen breaks above 115, what next?
A successful breakout above 114.50 has an upside target near 119. This is a major long-term resistance level. It dominated market behavior from 2001 to 2003 and again from 2005 to 2007. The market oscillated around the 119 level so there is a high probability that a significant consolidation pattern will again develop in this area.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders – www.guppytraders.com. He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.