USD/JPY Forecast to Drop After Break of Chart Support
USD/JPY TRADING Strategy: BEARISH
- Support break hints USD/JPY is resuming a 13-month downtrend
- First key support eyed below 107 figure, clearing 110 invalidates
- Broad-based trend dynamics hint at scope to challenge below 103
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USD/JPY looks to be resuming a 13-month downtrend following a corrective upswing from late-August lows. Prices recoiled from trend-defining resistance set from October 2018 to breach support defining the bounds of the three-month rise and marking the bottom of a bearish Rising Wedge chart pattern.
This suggests sellers are back in control. The next major layer of support seems to line up in the 106.78-96 area. Breaking below that on a daily closing basis sets the stage to challenge the 104.46-105.05 support shelf, a barrier in play since March 2018.
This too might give way. Setting aside the wild spike low registered in December 2018, prior trend dynamics imply scope for a move down of about 6.5 percent in the event of bearish resumption. That threatens to put prices south of the 103.00 figure in the weeks and months ahead.
Daily USD/JPY chart created with TradingView
The underside of the Wedge pattern has been recast as resistance and now establishes the initial upside hurdle. However, reclaiming a firm foothold above the 110.00 figure – and thereby breaking the October 2018 trend line – is probably a prerequisite to truly neutralize selling pressure.
USD/JPY TRADING RESOURCES
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.