USDJPY bulls have been in control since the January 3rd flash crash.
The selloff on the 3rd put an end to the decline that started with the December 19th break of wedge support.
Ironically, USDJPY bulls are nearing those pre-break levels at 112.70.
But there’s a reason I’m not bullish USDJPY.
Sure, the pair is off its year-to-date low by more than 600 pips. However, the price action since February is far from bullish.
Don’t get me wrong. The short-term rally is intact considering the pair’s higher lows and higher highs over the last few weeks.
What should have buyers nervous, though, is the rising wedge you see below.
It isn’t the cleanest wedge pattern I’ve seen, but it does suggest that buyers could be tiring following a relatively impressive rally.
I would keep a close eye on that 111.40 support area over the coming sessions.
A daily close below it would signal the start of a broader correction for USDJPY. Perhaps even a reversal.
The “daily close” refers to the New York 5 pm EST close. These charts are required for trading price action.
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It would also expose the next key support just above 110.00 and perhaps even the inception point of this wedge at 108.50.
As long as that 112.00 resistance area is intact, USDJPY buyers are going to struggle to gain traction.
Selling pressure, on the other hand, will likely intensify below 111.40.