The USDJPY has been drifting higher since the March low at 104.60. In that time, the risk-sensitive pair has managed to gain more than 600 pips.
A couple weekends ago I pointed out a descending channel that extends from the May 21st high. The pair had just come off channel resistance and was struggling to rally above the 110.70 region.
However, buyers eventually managed to break resistance on the 29th of June, which was also the last trading day of the month.
We can even see how this old resistance level has served as new support this past week. The USDJPY caught a bid here on both Wednesday and Thursday.
So far today, though, the buying has subsided once more, and the market is struggling to hold its head above 110.50.
The more significant area, though, may lie just below 110.50 at 110.30. If we draw a trend line from the March low and connect it with the May 29 low, it creates a confluence of support in the 110.30 region.
In fact, that trend line may be an ascending channel. The pattern connects with highs from March 13, May 2, and the May 21 daily close.
That’s going to be a key area for buyers next week. A failure to stay above it on a daily closing basis (New York 5 pm EST) would open the door to the late June lows at 109.40.
On the flip side, bullish price action from the 110.30 area next week could expose higher prices including the May high at 111.40.
I’m neutral here at the moment, but based on this past week’s price action, I’m not overly confident that buyers can pull it off. As always, time will tell.