We sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Today, the pair managed to close above the upper boundary of a bearish channel that has guided prices lower since mid-July. This threatens the validity of the down trend and suggests the fundamentals are setting up to take over from trends in risk sentiment as the key driver for price action. This week’s dismal economic data may have been the breaking the point: Japan’s Gross Domestic Product shrank an annual rate of -12.7% in the fourth quarter, confirming the world’s second-largest economy is mired in the worst recession since the 1974 oil crisis. We will exit the trade at market with a modest profit and shift to a neutral bias for the time being.
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