It’s no secret that I’ve been long USDJPY since early May.
My average rate is currently 106.77, up from 106.60 just a few days ago, as I added more during Friday’s dip.
If you saw Wednesday’s commentary, you know I was eyeing the support area between 106.90 and 107.30.
After reaching a low of 107.08 on Friday, USDJPY rallied 80 pips to retake the 107.30 handle.
I know many are expecting weakness from USDJPY, especially given the pair’s recent failure to climb above the 108.00 resistance area.
As for me, I’m anticipating the opposite.
I’ve said for weeks that the multi-year wedge pattern appears to be a continuation pattern following the 5,000 pip rally between 2012 and 2015.
That’s my base case unless we get a monthly close below wedge support near 106.00.
I could be wrong, and USDJPY could be headed lower.
However, if I’m right, it means a higher USDJPY, and not by a few hundred pips, but a few thousand.
The 3,000 pip height of the multi-year wedge above suggests an upcoming move of the same distance.
And if we use an objective based on the flag pole (2012 to 2015 rally), we get a 5,000 pip objective near 160.00.
Of course, it first depends on whether or not buyers can take out the 109.00 resistance area followed by the eighteen-year resistance at 124.00.
If such a move sounds impossible, I assure you it isn’t.
USDJPY already did this between 2012 and 2015, so to say it’s impossible or that it won’t happen is unrealistic.
As for what to watch next week, look for a break above the 108.00 resistance level as long as 106.90 to 107.30 holds as support.
Such a break would expose the 109.00/30 resistance area, which is the top of the multi-year wedge pattern above.
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