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USD/JPY Probing Break to the Upside from Downward Sloping Channel

USD/JPY Probing Break to the Upside from Downward Sloping Channel

Martin Essex, MSTA, Analyst

USD/JPY price, news and analysis:

  • USD/JPY has been falling steadily for almost a year, trading within a downward-sloping channel on the charts.
  • Now, though, it is probing the channel resistance line and if it manages a sustained break above it there would likely be further gains to come.
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USD/JPY attempting break higher

USD/JPY is probing the resistance line of a downward sloping channel on the charts that has contained price action since early last year. If it breaks through and stays above that line, further gains would likely follow.

USD/JPY Price Chart, Daily Timeframe (March 16, 2020 – January 27, 2021)

Latest USD/JPY price chart

Source: IG (You can click on it for a larger image)

Looking at this in more detail, the chart below shows the most recent action. At the time of writing, the resistance line checks in at 104.02 and the exchange rate is 104.09 so this can hardly be called an upside break. However, if the price continues to move up then the highs of 105.68 on November 11, 106.11 on October 7 and 107.05 on August 13 would be reasonable targets.

USD/JPY Price Chart, Daily Timeframe (August 17, 2020 – January 27, 2021)

Latest USD/JPY price chart (2)

Source: IG (You can click on it for a larger image)

If the price fails to break through convincingly and falls back, the risk is it could drop all the way down to the 102.59 low touched on January 6. It is also worth noting that the 14-day RSI at the bottom of the chart above has failed for a while to break above the 60 level, and that too warns that an upside break would be difficult.

Traders might therefore want to wait for a few days to make sure a break higher is sustained before entering bullish positions.

If you’d like to know how to build and trade a trend-following strategy, there’s a useful article here

We look at currencies regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

--- Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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