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Since February 21st, the USDJPY has moved over 2,000 pips.
Sellers confirmed the false break above a multi-year wedge pattern on February 27th.
That sub 109.80 close on the 27th was our cue to get short.
After reaching 101.20 in a matter of days, the USDJPY clawed back everything it had lost in just eight trading days.
We can attribute much of that rebound to what was essentially a US dollar short squeeze on a global scale.
The question now is, where does the USDJPY go from here?
Will this latest round of consolidation result in a break higher or lower?
At the risk of sounding like a broken record, I will state that I don’t know where the USDJPY or any currency pair will move next.
Successful trading has never been about knowing the future direction of markets.
It’s about developing a construct of what is probable and respecting your risk tolerance.
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Not to mention having the discipline to stay patient when markets become indecisive.
That’s a critical piece of advice with regard to USDJPY.
Since March 20th, the pair has gone nowhere fast.
But that isn’t surprising given the aggressive moves we’ve seen over the last five weeks.
As always, it’s going to take a break of this consolidation for traders to get a better sense of where the USDJPY is likely to go from here.
I will say, however, that I’m more likely to be a seller at some point than a buyer.
In my opinion, the USDJPY squeeze that pushed the pair higher recently isn’t likely to last.
I could be completely wrong, but we can already see how the bullish momentum is waning.
That said, as long as USDJPY is trading above the channel support I illustrated on March 16th, the bullish momentum is intact.
As of this writing, that channel support comes in near 111.00 or just below.
But to see a meaningful rotation lower from USDJPY would require a daily close below the confluence of support at 109.50.
Alternatively, the pair needs to close above 112.20, in my opinion, to trigger a continuation higher, perhaps up to 114.50.
Above all else, though, patience is essential during times of indecision.
The money is in the waiting, not the trading.