The USDJPY is back above former channel resistance for the second time since early May. The level extends from the January 3rd high and has been influential throughout 2017 particularly in the last two months.
Buyers managed a daily close above it on May 8th which triggered a move above the 113.25 handle. However, those gains were short-lived as the pair slowly drifted lower for a week and then crashed 230 pips on May 17th.
Channel resistance then capped several advances including that of May 24th as well as the 2nd and 16th of June. But this past Monday’s session has the risk-sensitive USDJPY trading back above the key area.
As I mentioned in yesterday’s EURJPY commentary, the yen has been a mixed bag since late last year. Look no further than the USDJPY monthly chart below to get a sense of the indecision here.
Notice the opposing monthly pin bars. This is a telltale sign of indecision from buyers and sellers. In essence, the pair is at an impasse where neither side is willing to push the envelope.
During times when follow through is hard to come by it’s best to do one of two things. Either stay on the sideline or limit your expectations to the current range offered by the market and nothing more. The challenge with the latter is achieving a favorable risk to reward ratio.
As for the USDJPY, the current range lies between 110.30 support and 111.70 resistance. The latter is what rejected this week’s advance between Tuesday and Wednesday.
A daily close above 111.70 would expose the next key resistance level at 113.25. But don’t dismiss the possibility of a move back below the confluence of support near 110.30 as anything is possible in these market conditions.
I’m going to remain on the sideline until a favorable opportunity presents itself.
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