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USDJPY Cracks Support at 110.10 but Daily Close Is Key

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Another bout of risk-off sentiment has taken the USDJPY below key support at 110.10/25. This is an area I’ve mentioned a few times in recent weeks including this past Sunday.

The 110.10/25 region was instrumental in attracting a bid back in March and April of this year. It did the same on May 18th, one day after the single session 230 pip drop. Note that was also the day the USDJPY fell back below channel resistance.

I wrote a lesson on the idea that false breaks tend to perpetuate a sentiment that triggered the false move in the first place. In other words, the effects of a false break tend to extend well beyond the initial false narrative.

In the case of the USDJPY, the May 17th close back below channel resistance near 112.10 not only negated the May 8th bullish break, but it also proved that sellers remained in control. We used that information to begin watching for selling opportunities.

With the pair trading well below the 110.10/25 area, it seems the bearish bias is alive and well. However, one thing is missing from today’s breakdown, and that is a daily close (5 pm EST) below the area.

Until that happens, I won’t have the conviction to say that the USDJPY has indeed broken the key support area. If we do get a daily close below 110.10/25, it will offer an opportunity to sell any retests of the area as new resistance. It would also expose the current 2017 lows near 108.40.

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USDJPY daily chart

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2 comments
Albert says

Excellent! Pro analysis.

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Ellison Tino says

I have one question regarding the retest…” we do get a daily close below 110.10/25, it will offer an opportunity to sell any retests of the area as new resistance’ My question then is do you watch for retests on the 4H or daily timeframe?

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