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On Sunday I pointed out a possible wedge pattern on USDJPY.
The upper level extends from the year-to-date high near 114.50. It came under pressure on November 28th, but sellers held their ground.
The lower level begins with the August low at 109.77. It connects with the October low at 111.37.
However, wedge support is a little more questionable than resistance.
We saw resistance cap the November 28th advance, but we have yet to see how this support level will hold up.
It may not take long to find out though.
Today’s session is testing support as I type this. And so far, I am starting to see a few bids crop up near 112.40.
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That said, I’m by no means bullish USDJPY.
In fact, based on what we’ve seen from other yen pairs including CADJPY, I’ll go out on a limb and say that a break lower is the more likely outcome here.
A weaker U.S. dollar would also compliment the potential EURUSD bullish reversal pattern I wrote about on Monday.
As for USDJPY, a daily close below the 112.40 support area would expose downside targets including 111.70 and 110.70.
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Alternatively, bullish price action from this 112.40 area could trigger a move back to resistance near 113.80.
Keep in mind that non-farm payroll (NFP) is on tap this Friday at its usual time of 8:30 am EST.
That will likely trigger an increase in volatility.
I will say, however, that NFP isn’t the market mover it used to be. That doesn’t mean it won’t shake things up though.
In summary, I’m staying relatively neutral here, but I am leaning toward a bearish outcome.
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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