Trying to make sense of the USDJPY has been no easy task lately. The pair has been difficult to analyze for the better part of the year. Even the rally that began in June was choppy and difficult to read.
It’s why I’ve spent most of my time focusing on other markets. Why waste time on a currency pair with no clear direction or levels when there are other more favorable pairs to trade?
However, since topping out in mid-July, the USDJPY has been trying to untangle itself. A look at the daily time frame shows what appears to be a falling wedge that started developing earlier this month.
Whether this pattern has any significance is unclear at this point. It may be a catalyst for a move back to the year to date highs near 113.20, or it may be more choppy price action with no real impact.
What I do know is that the pair is challenging wedge resistance as I type this. At the moment, that level comes in a few pips shy of the 111.00 handle.
A 4-hour close above this area at 110.90 could trigger additional buying pressure. Of course, a daily close above it at 5 pm EST (using a New York close chart) would be ideal.
If buyers can manage to break wedge resistance near 110.90, a retest of the area as new support would likely attract a bid. Key resistance above that comes in at 112.15 followed by the current 2018 highs near 113.20.
Take extra precautions if you decide to trade this one though. As I mentioned above, the pair has been relatively unfavorable for the better part of 2018. I’d be surprised if things clear up suddenly following a break of this wedge pattern.
Then again, the indecisiveness has to end somewhere, so why not following a breakout here?