Important: This site uses New York Close Forex Charts so that each 24-hour session starts and ends at 5 pm EST. These charts are essential for trading price action. Any other charts can produce false signals.
There’s a lot of consolidation occurring in the currency market.
Many of you have asked for me to write about gold or US crude, and the reason why I haven’t is that they aren’t favorable right now.
Of course, that’s my opinion, but the price action says it all.
I prefer markets that have well-structured chart patterns to give me some clue as to where the price might be going.
Most of the currency pairs I track lack any clear sense of direction at the moment.
However, one pair I am keeping an eye on is USDJPY.
As choppy and indecisive as the price action has been here and elsewhere, I can’t help but feel that the next big moves aren’t far away.
That’s especially true when you consider the amount of Fed speak on this week’s schedule.
The issue with the USDJPY is its conflicting technical patterns.
You may recall the inverse head and shoulders I wrote about several weeks ago back when the pair was bouncing from 106.80.
That structure is technically still intact.
But we also have a rising wedge pattern that hints at exhaustion from buyers.
I wrote about this last week and again over the weekend.
As you can see, the USDJPY has a decision to make.
That said, I do favor the bearish scenario via the rising wedge simply because upward breaks of ascending levels rarely last, in my experience.
Think about if a bearish flag pattern broke to the upside.
Would you trade it?
Probably not. The same goes for a rising wedge like the one below.
That doesn’t mean USDJPY will break lower, though.
There are no guarantees in this business, and my job as a trader is to listen to the market, not try to outsmart it.
With that in mind, it’s going to take a daily close below wedge support near 108.70 to confirm the breakdown.
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That would expose the neckline of the inverse head and shoulders around 107.50 and perhaps the 106.80 horizontal level I mentioned earlier.
Just keep in mind that USDJPY could have other plans.
If the inverse head and shoulders is going to play out, buyers first need to take out the 109.50/60 resistance area.
That would expose the next horizontal level at 110.60.
But as I mentioned above, I’d be careful trying to buy an upside break of an ascending level due to their tendency to form bull traps.
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