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USDJPY bulls have been in control since the January 3rd flash crash.
The selloff on the 3rd put an end to the decline that started with the December 19th break of wedge support.
Ironically, USDJPY bulls are nearing those pre-break levels at 112.70.
But there’s a reason I’m not bullish USDJPY.
Sure, the pair is off its year-to-date low by more than 600 pips. However, the price action since February is far from bullish.
Don’t get me wrong. The short-term rally is intact considering the pair’s higher lows and higher highs over the last few weeks.
What should have buyers nervous, though, is the rising wedge you see below.
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It isn’t the cleanest wedge pattern I’ve seen, but it does suggest that buyers could be tiring following a relatively impressive rally.
I would keep a close eye on that 111.40 support area over the coming sessions.
A daily close below it would signal the start of a broader correction for USDJPY. Perhaps even a reversal.
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It would also expose the next key support just above 110.00 and perhaps even the inception point of this wedge at 108.50.
As long as that 112.00 resistance area is intact, USDJPY buyers are going to struggle to gain traction.
Selling pressure, on the other hand, will likely intensify below 111.40.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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