USD/JPY Technical Outlook – Inching Closer to Wedge Break on Election Volatility
USD/JPY Technical Highlights:
- USD/JPY swinging on election near big support
- A clear break below 10400 could open up path lower
USD/JPY may soon break 10400
There is still a lot that can happen with the U.S. election before we have a clear winner, and a on that the USD has been flailing around depending on whether it looks more likely to be a Biden or Trump win. Hopefully soon we will have a resolution.
Looking at USD/JPY from a technical perspective, the 104-line is big and could break with further clarity in the election results. The descending wedge that has been forming since the last day of July suggests we will eventually see a breakdown that could lead to a test of the coronavirus low and big psychological level of 100.
But before running with an aggressively bearish bias we first need to see a confirmed break of support – until it does then we must continue to respect it for what it is, support. A breakdown could have the March low at 101.18 in play along with the 100 level.
On the flip-side, if USD/JPY continues to hold 104 and mount a rally, we could always see the increasingly narrowing range break to the upside. But at this time given the general trend and descending nature of the wedge it seems it will be a more difficult path to hold onto.
A top-side break of the upper trend-line would quickly have the channel line off the Feb high in play around 106 and then the falling 200-day at 107.03.
All-in-all, the quieting price action of USD/JPY over the past few months suggests a sizable move is coming, but it will be prudent for traders to wait on conformation of a breakout before running with a bias. Price could always continue to chop sideways for a while before providing clarity.
USD/JPY Daily Chart (descending wedge, 104 big support)
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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.