USDJPY Future Direction Hinges on 108.40

The USDJPY is coming off a resistance area today near 109.60.

I discussed this level in the December 14th forecast video and again on the 21st.

It’s a trend line that extends from the November 2018 high. One could even argue that it extends from the October 2018 high.

Either way, it’s clear now that 109.60 is attracting sellers.

The trend line below also outlines the short-term downtrend on USDJPY that has been in place for thirteen months.

In fact, the USDJPY has struggled to maintain any long-term gains since the head and shoulders pattern that developed in 2015.

I mentioned this topping pattern several times in early 2016.

Despite the latest weakness from 109.60, though, the pair hasn’t carved a sell signal such as a pin bar or engulfing candle.

But that’s okay.

If you watched the December 14th forecast video, you know that one way to play USDJPY is to watch the highs and lows.

Notice how the pair has carved higher lows and higher highs recently.

Any change in that pattern, such as a lower low followed by a lower high, could be the start of a turn lower.

I also think that the 108.40 support region is going to be key.

Since mid-November, the USDJPY has held above 108.40 on a daily closing basis.

That means a daily close below it could signal weakness.

Also note how buyers struggled to carve a higher high recently, probably due to the trend line resistance in the chart below.

So to wrap things up, a daily close below 108.40 could signal weakness, which would also be the start of the first lower low in this series.

Alternatively, a daily close above trend line resistance followed by a push above the latest highs at 109.70 would suggest strength and expose 111.10.

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