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The USDJPY is approaching an influential area at 108.00.
It’s the top of the descending channel that began earlier this year.
I wrote about the possibility of a 108.00 retest for USDJPY on September 5 when the pair was in the process of breaking 106.80.
The market tested that 106.80 level as new support on the 6th and again on the 9th.
I pointed out that retest in Sunday’s analysis.
The idea was simple: as long as 106.80 was intact as support on a daily closing basis, USDJPY was headed for 108.00.
As of right now, the pair is trading at 107.70, just 30 pips below that level.
The big question now is, will 108.00 hold as resistance?
That’s anyone’s guess.
But if you bought USDJPY at 106.80, you should assume 108.00 will hold.
That’s the most conservative approach.
However, I’m still going to have a plan for either scenario.
If we see bearish price action such as a pin bar from the 108.00 area, it could signal a turn lower.
Perhaps back to 106.80.
Alternatively, a daily close above channel resistance near 108.00 would have me watching for a buying opportunity.
Key resistance above that comes in at the 109.00 handle followed by 110.60.
I will say this, though…
Given the way USDJPY has behaved within this channel since August, a break higher does seem likely.
As always, time will tell.