The USDJPY has been trending lower since retesting the May high at 114.35 in mid-July. Since that time, sellers have taken the pair lower by 624 pips.
However, the price action in August suggested that sellers were beginning to tire. Starting with the August 11th bounce, the pair began to “fan out” in a way that formed a broadening wedge, albeit a crude one.
Then during the August 29th session, sellers hit a wall of buyers at the 108.25 handle. This level is just 13 pips above the 2017 low which still stands at 108.12.
Note that buyers are also respecting the June low at 108.79 on a daily closing (5 pm EST) basis. That gives us an area of support that resides between 108.25 and 108.79.
Yesterday’s bounce from the area is telling to say the least. The 165-pip rally engulfed the previous seven sessions but did fall short of overtaking resistance at 109.85.
Although today’s prices are hovering 40 pips above the level, the break is unconfirmed without a daily close above it. Until then the outcome is too uncertain to consider taking up a position here.
A daily close above 109.85 would expose the next key resistance level at 110.90 followed by 111.90. Alternatively, a daily close below 109.85 would negate the bullish outlook and turn our attention back to the 108.25/80 support area.
If this 600-pip range remains intact, we could be in for several weeks of gains. Of course, it all depends on what the market gives us, so the day-to-day price action will be a critical factor.
Want to learn how I trade price action? Watch the Free Webinar