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USDJPY Future Direction Hinges on 109.80

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Last week, I wrote about a USDJPY breakout from a multi-year wedge pattern.

The top of that structure dates back to 2015.

However, so far this week, there’s a decent chance that the entire breakout was false.

Notice the aggressiveness of this latest rotation lower.

The USDJPY is back below that 111.10 key level and is also fast approaching the top of that 2015 wedge.

But this is the opposite of the “rounded retests” I like to trade.

As it is, the pair has nearly wiped out all of last week’s gains in just three trading days.

That isn’t what you want to see as a potential buyer.

That said, the USDJPY still needs to close the day back inside that 2015 wedge for me to call it a false break.

As of this writing, that level is near 109.80/90.

A daily close below that would confirm the false break and expose the bottom of an ascending channel that extends from the 2019 low.

Keep in mind too that we’re coming up on the February close.

If the USDJPY does confirm the false break here, we could see a bearish pin bar materialize on the monthly time frame.

But as long as the pair is above that 109.80/90 support area, sellers have to stay cautious, in my opinion.

That’s the top of the 2015 wedge pattern, so I’d be surprised to see buyers give in without a fight there.

If this does turn out to be a false break, though, I will anticipate an extended move lower.

A false break of any pattern often triggers a move in the opposite direction.

Look no further than what happened to EURCAD on February 6th.

That’s especially true when dealing with a multi-year level like this one on USDJPY.

With that in mind, a daily close below 109.80/90 or so would not only open the door to the ascending channel bottom but perhaps 106.80.

We could even see an extended run at the bottom of the multi-year wedge pattern around 105.50 or thereabouts.

For now, though, the future direction for USDJPY hinges on that 109.80/90 area.

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USDJPY daily chart

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13 comments
Justin Bennett says

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Aubrey says

Hi Justin thanks for yet another key update. I was wondering if your telegram account still works I haven’t been getting updates from it. Thanks Aubrey

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franklin says

When price invalidates your Support and Resistance area, do you still keep them even when price has made an extensive move past it?

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Jalil says

Hi
Few days ago I tried to pay but in the payment page it’s 497$ instead of 297
Can I pay with bitcoin?

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Godwin says

I’m looking forward to be in pact with your knowledge ,I know I will be enlighten, thanks.

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LAWAL says

i think this is beautiful retest

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ali says

Thanks for the excellent update on usd jpy sir justin.

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Sifiso says

Hi Justin…is it not that the big banks are taking profits on their dollar longs that is bringing the dollar down? And is the dollar not too stretched if one considers the average quarterly range?…I mean price action should not only be about support and resistance or trend lines…it is about figuring out how the big boys are trading a certain security and then finding low risk, high probability and high profit set ups that are in line with the big boys and also in line with your trading plan.

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    Justin Bennett says

    Honestly, none of that matters to me. I like to keep things overly simple.

    Reply
      Sifiso says

      I agree with you. A profitable trading strategy should be simple. However it must have a winning edge in the long term. This winning edge comes from the fact that profits are a function of market direction, therefore one needs to be in harmony with the market( trending or consolidating). And it’s no secret that the forex market is dominated by the big commercial banks, whose orders move the market. Hence in light of the above, one needs to be able to look at the charts and figure out what these guys are doing to be profitable in the long run. Also one needs a stringent risk management criteria and the patience and the discipline to relentlessly follow his trading plan.

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        Justin Bennett says

        Sure, but the only way to truly understand what the market makers and movers might be doing is to study price action on the higher time frames. That’s my point.

        Too many traders are trying to dictate a market’s future direction with opinions. Usually someone else’s. The ONLY thing that determines whether an event or outcome is “positive’ or “negative” for a market is the resulting price action. That’s it. Everything else is noise.

        Reply
          Sifiso says

          I am with you on that. Traders need to understand the three elements of successful trading: A simple strategy with a positive expectancy and that fits their personality, a robust risk management approach and the patience and discipline to relentlessly trade according to their strategy. It is not really the end result on a certain trade that really matters. It is whether traders are trading a strategy with an edge over the market, employing sound risk management skills and trading long enough to realize that edge long term.

          Reply
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