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USDJPY has been a tough pair to trade in 2020.
Although we’ve had a consistent downtrend since February, the pair has been incredibly choppy.
You can see some of that choppiness in the recent false break below 104.20.
Notice how 104.20 served as support between late July and October.
USDJPY fell below that 104.20 area on November 5th.
However, two days later, the pair shot through 104.20 with a 200 pip rally.
But I wasn’t convinced that USDJPY had turned the corner.
If you’ve read my recent posts, you know that the lower highs since February are key.
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Buyers will have to carve the first higher high to challenge that downtrend.
Because of this, there was nothing for me to do with regard to this latest false break.
On the one hand, there was no bearish rejection from 104.20 for me to sell USDJPY.
The market also retested 104.20 as new resistance far too quickly.
Those familiar with the way I trade know that I like to see a “rounded retest” of a level.
And on the other hand, I wasn’t interested in buying USDJPY because buyers failed to take out the October high at 106.00.
So, where are we today?
The USDJPY is breaking back below 104.20, but I’m skeptical as to how influential that area will be going forward.
That said, the lower highs since February are intact, which means USDJPY could still weaken toward 101.00.
I’ll be monitoring how the pair reacts to 104.20 if it closes below it again, but as of right now, there isn’t much to do.