For those who use USDJPY as a barometer for risk sentiment, the pair just confirmed that riskier assets are no better off today than they were a month ago. And if today’s jobs report is any indication, I would argue that things will get much worse before they get better.
But for now I want to talk about a pattern that I mentioned on September 24th, just before USDJPY broke to the upside on an intraday basis. However that break was short-lived as the pair quickly moved back below resistance before the session close.
In my experience, a false break on one side of a technical pattern often leads to an extended move in the opposite direction. So far USDJPY has not disappointed as the pair is now trading below former wedge support and looks poised to move lower.
From here traders can watch for selling opportunities as long as the pair remains below former wedge support on a 4 hour closing basis. Do note, however, that the 118.30 level could act as support based on the August 24th closing price along with several lows from February and March.
Summary: Watch for selling opportunities while USDJPY remains below former wedge support on a 4 hour closing basis. Key support comes in at 118.30 as well as the August 24th low at 116. Alternatively, a 4 hour close back above former wedge support would negate the bearish bias in the short-term and expose wedge resistance near 120.
