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USDJPY Back to Channel Resistance at 112.10

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The USDJPY is in the process of retesting channel resistance that extends from the current 2017 high. Buyers previously closed the pair above this level on May 8th, but last week’s 230 pip single session drop forfeited the new support level.

But by the end of Tuesday’s session, the pair had climbed back above the 111.70 handle. This is the location of two swing lows from February and also served as resistance late last week.

Today’s retest is an important one for risk assets as the USDJPY tends to signal shifts in risk sentiment more than any other yen pair. A daily close back above 112.10 would signal the next leg up for the pair as well as other crosses such as the AUDJPY and NZDJPY.

On the other hand, a daily close back below 111.70 would suggest the opposite and re-expose the 110.10 area.

One event that could spark a move in either direction is the release of the Fed meeting minutes today at 2 pm EST. And judging by the lack of conviction so far, my guess is that’s what market participants are waiting on before committing to a position.

A break one way or the other has to come soon as the pair is running out of real estate. If you had asked me one week ago what I thought was more likely, I wouldn’t have hesitated to say a move lower, but anything is possible at this point.

In essence, we’re waiting to find out whether the false break was the May 8th close above resistance or last Wednesday’s selloff. The outcome will likely have implications for risk assets across the board.

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USDJPY daily chart

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