USDJPY bulls are off to a strong start this week thanks to a bounce in equities.
But should you trust the latest rally?
I can’t speak for you, but I’m not rushing off to buy the USDJPY.
The pair is trading below the trend line that extends from the 2015 high, and it has yet to close above 108.50.
That’s the key resistance level I’ve had on my radar for the last few weeks.
Of course, that does not mean USDJPY bulls cannot or will not close the pair above 108.50.
Nor does it mean I’m not wrong.
While I still maintain a relatively bearish stance on the USDJPY, the pair could prove me wrong with a move back above 109.50.
But in the end, it all comes back to the technicals.
That’s the only thing I use to make decisions.
With that in mind, the 108.50 level could play a critical role in the future direction for the USDJPY.
A daily close above it would suggest that 108.50 will serve as support.
Alternatively, a daily close below it would signal further weakness.
If today’s session closes below 108.50 at 5 pm EST, it would also carve a bearish pin bar.
However, as of this writing, it’s all just speculation.
The market is going to do what it wants, and there isn’t anything you or I can do to change that.
Now, I did enter short here earlier today, which I announced in the member forums.
I did so in anticipation of a daily close back below that 108.50 level.
If USDJPY does close today below 108.50, I will add to my short.
And if it doesn’t, I will likely exit my position at little to no loss.
Key support below 108.50 comes in at 106.80 and 105.50 or thereabouts.
Resistance as of this writing comes in near 109.50, which is the top of the multi-year wedge from the 2015 high.