On January 28th, I discussed a confluence of resistance for USDJPY.
The intersection of the November 2018 trend line and Friday’s close meant that any retest of 109.20/30 was bound to attract sellers.
To be more precise, Friday’s close was 109.27.
I even included this price in the title of Tuesday’s post.
Wednesday’s high was 109.26, just one pip off of Friday’s 109.27 close.
Now, you may be wondering why 109.27 would be a significant price for the USDJPY, and it all comes down to gaps.
I’ve written about this concept in the past, but open gaps like the one that formed between Friday and Monday can often serve as support or resistance after the fact.
Because USDJPY gapped down, it meant 109.27 was likely to act as resistance.
As you can see, it did just that.
So far today, though, the risk-sensitive pair is catching a slight bid at the recent lows near 108.75.
But the risk-off narrative is still going strong.
As for USDJPY, I managed to get short here at 109.22.
My initial target is the ascending channel support I mentioned two days ago around the 108.00 handle.
However, that level may only trigger a temporary pause.
The combination of the latest false break above the November 2018 trend line and this ascending channel looks relatively bearish.
Not to mention the downtrend that has been in place since mid-2015.
So ultimately, I’m looking for 106.80 here. That’s my base case as long as the USDJPY remains below 109.30 on a daily closing basis.
Keep in mind that there are no guarantees in this business.
While the USDJPY looks relatively bearish today, that can change in an instant, so remain diligent.