The USDJPY is at a crossroads ahead of this Friday’s momentous non-farm payroll. A strong jobs report could trigger a breakout from a technical pattern that has dictated price action for the pair so far in 2016.
On the flip side, a weaker than expected outcome could result in a sharp move lower from the upper boundary of the pattern.
What price structure am I referring to?
The descending channel that extends from the January high at 121.68 has already capped two previous advances in both May and July. I mentioned the July 21st bearish engulfing day that emerged at resistance, which triggered a 600 pip slide over the next 17 trading days.
So will September follow in the footsteps of May and July or will the dollar bulls finally regain control?
That’s the million dollar question. But with a crucial NFP report coming up this Friday at 8:30 am EST, I certainly won’t be interested in trading the pair until the dust settles.
However, there’s no denying that the US dollar is at a potential turning point this week. Now it’s just a matter of waiting to see whether this Friday’s report favors the bulls or the bears.
A close above the 104 handle would expose the July high at 107.50 while a bearish signal at channel resistance would open the door for another run at the August low at 99.50.
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