USDJPY has been an incredible pair to trade recently. The technicals are some of the best in the currency market, if not the best right now.
I’ve mentioned the October trend line a few times since December, and so far, USDJPY bulls have been unable to breach it.
We even got a retest of 130.60 yesterday, a level I discussed in Saturday’s forecast.
It’s been several weeks of USDJPY stair-stepping lower.
However, the terminal pattern that’s formed here suggests the pair has to make a decision soon.
The 126.70 support area I’ve mentioned this month is still intact, as is 130.60 resistance.
But the two descending trend lines have formed a slight falling wedge, meaning USDJPY will have to break soon.
A falling wedge does not guarantee a bullish break, although that’s usually the case.
We can also back up the USDJPY analysis below with the US Dollar Index (DXY) chart, especially regarding 101.30 support and 103.50 resistance.
I’ve written about both levels recently, and the DXY is bouncing from that support region.
That said, 103.50 promises to be a strong resistance level moving forward.
As for USDJPY, it will take a daily close above 130.60 to confirm a bullish break toward 134.40.
Alternatively, a daily close below 126.70 would signal weakness. Just be sure to mind the lower trend line from November.