USDJPY has started to make up some lost ground after the latest Bank of Japan decision left buyers routed. By the time the dust settled, the risk-sensitive pair had lost nearly 500 pips before catching a bid just above the July lows at 100.20
I mentioned the 104 handle on July 29th following the BoJ announcement that left many disappointed. However, the selling pressure proved too intense, and the pair never made it back to test the level as new resistance.
Whether the strength we see today will persist as far as 104 is anyone’s guess. But I would certainly expect to see the pair offered heavily in this area if pressured in the coming sessions.
On another front, some traders are curious as to why USDJPY recently found support at 100.66 instead of 100.20, which is closer to the July lows.
A look at the 4-hour price action beginning with the pre-Brexit high of 106.80 tells the story.
If we draw a trend starting at the 106.80 swing high and connect it to the July high at 107.47 and then extend a second parallel level to the July low of 100, we get a (slight) ascending channel.
Now the million dollar question is, will the pair reverse at 104 (if tested) or will it continue higher to retest the channel top near 108?
We’ll have to wait and see. But given the prominence of 104 and seeing as how it’s also the 50% Fibonacci retracement from the July high to the current August low, I don’t see sellers giving up this area without a fight.
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