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We discussed the USDJPY on October 2 when the pair was trading at 112.62. Buyers had just tested the confluence of resistance in the 113.00 region and looked hungry for more.
Just 24 hours later bulls secured a daily close (5 pm EST) above the trend line that extends from the current 2017 high. This left the pair stranded between new trend line support (old resistance) and the 113.15 horizontal level.
Fast forward to today, and market participants are still fighting the same battle. We can see that the pair has not closed below new trend line support nor has it breached 113.15 resistance on a daily closing basis.
Some may be tempted to trade Friday’s bearish pin bar from the 113.15 area. But there are two reasons I won’t be trading it.
As always, if I have to question the validity of a setup, it isn’t worth the risk. To be more succinct: when in doubt, I do nothing.
With Monday being a U.S. holiday, I don’t see a break occurring today. That’s okay because the USDJPY needs more time to decide which way it wants to go. Until then, there’s nothing to do here as far as I’m concerned.
A daily close above the 113.15 handle would expose the July high near 114.35. If buyers were to manage a break above that level, there wouldn’t be much preventing a retest of the January and March highs at 115.40.
Alternatively, a daily close below new trend line support near 112.50 would expose 111.60 followed by 110.90.
This week is relatively light in terms of event risk. On Wednesday at 2 pm EST, we have the FOMC meeting minutes. Then on Thursday, we have PPI and unemployment claims at 8:30 am EST followed by Friday’s CPI and retail sales at the same time.