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The USDJPY is bouncing from a support level I wrote about on Sunday.
The area between 104.70 and 105.00 is outlined by descending channel support and two lows from earlier this month.
It’s why I’ve stated that selling USDJPY while above 104.70 is a risky endeavor.
However, as bullish as today’s rally may appear, I also think that buying the risk-sensitive pair is risky for now.
Until we see USDJPY climb back above 106.80 on a daily closing basis, bounces like today’s are nothing more than a relief rally.
I also dislike the idea of selling the pair should sellers take the price below channel support near 104.70.
That would be a sign of a possible bear trap, in my opinion.
All of the above leaves me with two options.
I can either look to buy the pair following a daily close above 106.80 or watch for sell signals higher up, perhaps at channel resistance.
I could even do both.
Of course, you can also trade the range between 104.70 support and 106.80 resistance, just keep in mind that USDJPY can break out at any time.
It’s often best to let stalemates like this play out before making any considerations.
But as always, the final decision is yours.