USDJPY has broken below trend line support that extends from the year-to-date low.
But this isn’t the first time.
You may recall the October 26th breakdown. We had waited several weeks for that close. Unfortunately, it turned out to be a false break.
Will this time be different or more of the same?
That’s the question that needs answering.
If this trend line is still significant, we should see USDJPY encounter selling pressure below 113.00.
I’m not concerned about intraday moves, but the daily time frame needs to hold below that 113.00 area.
Remember, I use New York close charts so that each session closes at 5 pm EST. Get instant access to the same charting platform I use.
The recent price action does appear to hint at weakness. I mentioned the way buyers were struggling to extend rallies in October.
That alone suggested USDJPY bulls were tiring.
Now we have what appears to be a lower high. The early October rally managed a 114.50 print, but this latest push higher topped out at 114.20.
The fact that buyers were unable to retest the year-to-date high could be significant.
As I discussed above though, the real test will take place at 113.00. That’s the area sellers need to hold in order to extend last week’s selloff.
Speaking of last week’s selloff…
While it didn’t occur at a major swing high, last week’s candle was a bearish engulfing one.
Combine that with the lower high, and things start to look rather bleak for buyers.
I wouldn’t call this a quality selling opportunity though. At least not yet.
The price action since mid-October is too messy for my liking, particularly the false break on the 26th.
Not to mention the fact that the market is still trending higher, so any shorts up here are counter-trend.
That said, things are starting to look more bearish than bullish. And a bearish pin bar today would only add conviction to that statement.
That’s especially true when you factor in the recent lower high which also carved a weekly bearish engulfing pattern.
Resistance is 113.00 at the time of this writing. Sellers need to hold that area on a daily closing basis if they intend to follow through on the recent weakness.
If they can’t and USDJPY closes back above this trend line, I will most likely remove the level from my chart.
Targets for a move lower include 111.70 followed by 110.80.
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