USD/JPY Technical Analysis: The Wedge Before the Storm
- USD/JPY Technical Strategy: Flat
- Positioning Favors Weakness as Prices Consolidate Between 121.90 & 118.50
- Long-Term Trend Keeps Eyes on Upside Break And Trend Continuation
The strongest move in the JPN225 since 2008 has given the highly correlated USDJPY a clean bid into pattern resistance. USDJPY currently sits fixed between 121.85 and 118.50 after the August 24th fallout. The price pattern currently favors a wedge, which favors a continuation in the direction of the move prior to the wedge or lower, but the long-term trend keeps the preference on an upside break.
USDJPY continues to push away from range support of 118.50. However, a typical sideways pattern of USDJPY favors the range traders until a definitive break through 121.90 is held. Support near 119.30 provides attractive bids in hopes of a move to the top of the range at the Aug. 28th high of 121.75 or more attractively a move through resistance to the 100-DMA at 122.33. Alternatively, a breakdown below the September 4th low and Aug. 24th close of 118.40/58, opens the door for a challenge of 116.082.
We’re currently seeing a market that favors a range trading approach of buying support and selling resistance. The 5-day ATR of 124 provides a lot of volatility to trade the range until a breakout appears. Given the ability of USDJPY to coil before a breakout, traders are well served with a stop and reverse order in case they’re in when a breakout occurs against their original play.
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