The USDJPY made a significant move last week closing above descending channel resistance that extends from the 2016 high at 121.68. I mentioned this pattern ahead of the September 2nd non-farm employment data.
At the time the pair was trading near a confluence of resistance at 104.00. And sure enough, last week’s rally topped out at 104.15 before retreating to 102.95 ahead of the weekend.
When trading price action, it’s important to observe how a market responds to a predefined area in real time. In the case of USDJPY, the selling pressure that developed last Thursday and Friday indicates that 104.00 is indeed a critical level to keep an eye on over the coming sessions.
Of course, the big unknown is whether the last five sessions are the beginning of a new trend or merely a relief rally amidst the fourteen-month downtrend.
For now, the answer is unclear. However, a daily close above the 104.00 handle could ignite enough of a spark to extend prices to the July high at 107.50. Keep in mind that the 106.10 area could also attract some offers on the way up.
I’m keeping this on my watchlist for the time being, but it’s going to take more than a daily close above the level for me to commit capital to a long position. I’ll need to see the area retested as new support provided buyers can muster a daily close above it.
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