USDJPY: Keep an Eye on 112.70 – 113.00 Next Week

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USDJPY bulls are on the move today after two consecutive losing days. That said, the pair is once again trading below the 113.15 handle after Wednesday’s 112.51 close.

We looked at the USDJPY on the 13th when prices were teetering on 113.15 just hours before the Fed rate decision and statement. In that post, I pointed out how a daily close below the key level would begin to erase last week’s bull move.

As you can see from the chart below, Wednesday’s 100 pip decline just about did that on its own.

Technical analysis 101 tells us to watch for a retest of 113.15 as new resistance next week. However, there is a 4-hour pattern that may prevent that from happening.

The ascending channel in the chart below broke down during Thursday’s session. We can even see how buyers attempted to prop up prices for 16 hours before they finally gave in to the selling pressure.

Because it’s Friday, I’m not going to entertain a short entry today. I’d rather wait until Monday to reassess the situation and avoid the risk of getting caught on the wrong side of a weekend gap.

For next week, I’m going to keep an eye on the area between 112.70 and 113.00. Any bearish price action in this region would produce a favorable short opportunity.

The next key support comes in near the November lows at 111.00. Keep in mind that we could also see buyers step up at the late-September and mid-October swing lows at 111.60.

As long as prices remain below former channel support on a 4-hour closing basis, I will remain bearish here. I don’t anticipate an extended move given the holiday liquidity drain that is upon us.

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