USD/JPY Technical Analysis: Passing on Triangle Breakout

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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 118.96, 118.10, 116.76
• Resistance: 120.82, 121.91, 123.88

The US Dollar may be readying to resume its advance against the Japanese Yen after prices cleared resistance at the top of a two-month-old Triangle pattern. A daily close above the December 23 high at 120.82 exposes the 38.2% Fibonacci expansion at 121.91. Alternatively, a turn below Triangle top resistance-turned-support at 118.96 clears the way for a challenge of recently broken channel top at 118.10.

While entering long seems tempting, we will tactically opt to stand aside. A strong correlation between USDJPY and the S&P 500 stock index hints at a high sensitivity to sentiment trends. That makes a long trade vulnerable to the breakout of risk aversion if upcoming negotiations between Greece and the EU are unsuccessful. With that in mind, we will stand aside.

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Daily Chart - Created Using FXCM Marketscope

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com