USD/JPY Technical Outlook in Limbo, but Leans Bearish
USD/JPY Technical Highlights:
- USD/JPY trading outside of large rising wedge, should soon get a resolution
- Price outside of the rising wedge suggest lower, but conviction lacking at the moment
USD/JPY has been an interesting pair of recent due to the currency interventions, with down-moves unable to gain real traction organically. But a dollar bid continues to keep most currencies suppressed so it is difficult to write off strength as sustainable given the larger technical backdrop.
The rising wedge that had formed the past few months suggested that at some point we would see either a shot higher that ended the move higher or a breakdown that would spark an unwinding that would cause USD/JPY to drop by a material amount.
This all came to a cross-road around the 1998 high, which thus far has been influential. With the 1998 high in play and price outside of the wedge it would appear we have the makings of a breakdown coming, but price action has been stubborn.
Recent sessions have seen some swings, but those swings are becoming increasingly benign forcing USD/JPY into more wedging action. Will this finally lead to the breakdown the broader rising wedge suggested could happen?
I think that is where we are headed, but a breakdown below the recent low outside of the wedge needs to develop first. If a drop below 14510 can unfold then I think a drop to at least 140 will be the next step, with the possibility of seeing 135 and lower.
But if price maintains and starts to rise above 14885, then a test of the high could be in order, with of course the risk of more currency intervention to keep longs on their toes.
USD/JPY Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.