The USDJPY finished 2016 with a bang, rallying 1,750 pips between the November 9th US elections and December 15th. But so far this year, the pair has lost 600 pips.
However, recent price action suggests that a near-term bottom is in place.
The two swing lows between January 17th and the 24th hint at a double bottom pattern. What’s appealing about this formation is that the distance from the two lows to the neckline is almost the same as the distance from the neckline to the objective.
In fact, the two are off by less than five pips. The distance from the neckline to the double bottom is approximately 304 pips while the distance from the neckline to the measured objective is 300 pips.
From here traders can watch for a close above the January 19th high at 115.60. Such a close would confirm the reversal pattern and expose the objective at 118.60.
Within the next 24 hours, we have two key events that will affect the US dollar. Advance GDP and core durable goods orders will be released tomorrow at 8:30 am EST.
These figures will either support a higher USDJPY or force us to question the validity of this reversal pattern. But with another 90 pips to go just to confirm the structure, neither of tomorrow’s events poses a risk for those interested in trading this (potential) double bottom.
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