I first wrote about the potential for a higher USDJPY on May 11th.
The falling wedge pattern that confirmed on the same day looked bullish, especially if the 107.00 area was going to hold as support.
After a successful retest of 107.00, USDJPY climbed back above 107.30 and then traded sideways for eight sessions.
However, something interesting occurred on Friday, which I wrote about on this blog.
The bullish pin bar that developed before the weekend hinted at a push higher this week.
That was actually an inside day pin bar combination, which is one of the most reliable candlestick patterns around.
I mentioned this to members on Friday.
And if you saw Saturday’s Forex forecast video, you know that one of the options was to buy a 50% retracement of Friday’s pin bar.
Monday gave us just that.
With USDJPY surging 100 pips on Tuesday, it’s time to think about what’s next for the pair.
As I stated last week, I’m interested in adding to my long position above 108.00.
I’ve been long USDJPY since early May when the pair was trading just above the 106.00 level.
Just keep in mind that the pair is getting very close to the top of the multi-year wedge I’ve been discussing for weeks.
As you can see, the top of the wedge pattern on the monthly time frame comes in between 108.80 and 109.00 at the time of this writing.
That means USDJPY is just 30 pips below its multi-year resistance.
The tricky part about the pattern above is that it’s going to take a monthly close beyond it to confirm the breakout.
Note that USDJPY is not respecting the pattern above on a daily or even weekly closing basis.
That means we need to see the month of June close above the 109.00 region.
If it doesn’t happen, USDJPY will remain in its consolidation phase.
In the short term, I want to see buyers hold prices above 108.00, which should now serve as support for the pair.
Key resistance comes in between 108.80 and 109.00 with a monthly close above that exposing much higher levels.