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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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USDJPY bulls had a difficult time breaking above the 107.40 handle. I wrote about it in the April 15 weekly forecast, noting that it would take a daily close above the level to push prices higher.
In that same forecast, I also mentioned the April 13 bearish candle and how I did not consider it a selling opportunity.
After two weeks of struggling to crack resistance at 107.40, buyers finally managed a close above it on Friday. Not surprisingly, USDJPY bulls are stealing the show so far in today’s session.
However, I’m still not overly bullish the USDJPY. In fact, I think this pair is perhaps the worst way to express a bullish view of the U.S. dollar. Pairs like the EURUSD, GBPUSD or just about any other major currency pair are better suited in my opinion.
Why am I hesitant to take a bullish mid to long-term stance on the USDJPY?
Namely because of the breakdown that occurred in mid-February. You may recall my February 13 commentary where I pointed out multi-year wedge support that extends from the September 2012 low.
That level broke just hours later when the pair closed the day (remember, I use a New York close chart where each session closes at 5 pm EST) below the 108.30 area.
There’s always a chance that the trend line from the September 2012 low is of little significance. But judging by the price action in late January and early to mid-February, I’d say it’s incredibly relevant.
Moreover, the USDJPY is fast approaching the 108.50 handle. This is an area that supported prices earlier this year just before sellers broke that 2012 trend line. It’s also the 38.2% Fibonacci when measuring from the November 2017 high to the current 2018 low.
With that in mind, I’d expect to see an influx of selling pressure around 108.50 if tested as new resistance over the coming sessions.
Of course, a daily close at 5 pm EST above 108.50 would expose former trend line support from September 2012 as new resistance. But for now, all eyes are focused on how much selling pressure materializes at 108.50 and if it’s enough to repel buyers.
To the downside, we have the 107.40/75 area. A daily close below 107.40 would take us back to 106.60 and perhaps even 105.50. For now, though, buyers are in control and are showing no signs of slowing.
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