USDJPY: July Breakdown Still in Play

On August 1st, I wrote about a significant breakdown from USDJPY.

The July close below 106.00 was the first time the pair had closed a month beyond a multi-year wedge pattern since its inception in 2015.

However, following the July close, USDJPY rallied 120 pips.

It even closed back inside of this wedge pattern on the daily and weekly time frames?

Why is that?

If USDJPY actually broke down in July, why would we see such a rally and a weekly close above 106.00?

There’s the chance the July breakdown was a false move.

However, I think it’s far more likely that USDJPY is respecting this pattern, including the 106.00 handle on a monthly closing basis.

As I mentioned to DPA members earlier today:

If we’re going to use the monthly time frame to confirm a breakout, why should we use a daily or weekly close back inside the pattern to indicate a false break?

Answer: we shouldn’t.

This could change, but right now, it looks like USDJPY is going to stay below 106 on a monthly closing basis. 

The significance of the monthly close as it relates to this pattern it something I’ve discussed for months now.

My point with the comment above is that the daily and weekly closing prices don’t matter, at least not in terms of this wedge pattern.

It’s all about the monthly close for USDJPY.

With that in mind, as long as USDJPY stays below 106.00 on a monthly closing basis, the July breakdown is intact.

That also means the door to 101.00 support is wide open.

Only an August close back above 106.00 would change my mind.

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