Finding quality trade setups has been challenging since mid-April, with the forex market mostly sideways.
That said, the Japanese yen shows a high-time-frame breakout. This isn’t any ordinary breakout, as the trend line below extends back to the 2020 high, making it a five-year level.
Last month, the yen closed above this trend line for the first time, and it has already tested the level as new support this month.
Yen Basket of Currencies – Monthly Time Frame:
As long as the yen holds above this trend line, looking for longs is the way to go.
The question is, what currency should you sell against the yen? After all, the name of the forex trading game is pitting strength vs weakness.
Given the overall look of the DXY, the US dollar comes to mind. The index has had a rough few months and is still hovering below its multi-year range lows near 100.00.
With this information, let’s analyze the USDJPY to see if anything suggests a possible trade setup.
First, the pair is in a downtrend, so shorts are favored. Second, the pair recently failed to reclaim the 146.00 resistance area. And third, we have a clean ascending channel on the 4-hour time frame.
Furthermore, USDJPY didn’t thoroughly retest its 2024 low of 139.50 last month, so sellers may want to complete the task this month.
Getting more granular, the ascending channel below could signal a continuation pattern in the form of a bearish flag. Targets from here include the 142.00 lows and the 139.50 low from 2024.
A daily close below 144.00 will flip the level to new resistance, making it appealing to sell against if USDJPY bears get the job done today. Alternatively, a sustained break back above 144.00 would negate the bearish bias.
USJPY 4-Hour Time Frame:
