The USDJPY has looked relatively bullish since the August 26 low.
That is until the last 48 hours.
First, Wednesday’s session failed to close above the 109.00 resistance level we’ve discussed several times recently.
Notice too how Wednesday formed a bearish rejection candle of sorts.
That was enough to lead me to believe that a pullback was in order.
Second, the price action following Thursday’s 90 pip decline is starting to look like a rising wedge.
The lower level extends from the year-to-date low while the top of the wedge starts from the June 25 swing low.
As you may know, a rising wedge signals exhaustion from buyers.
The only thing more bearish to the wedge pattern in the second chart below is the weekly bearish engulfing pattern that’s developing.
Notice how the last two bearish engulfing weeks at swing highs in November 2018 and April 2019 triggered substantial declines.
To be fair, the week isn’t over yet.
But it would take an 80 pip rally on Friday to negate the formation.
The only event that might be able to trigger a move of that magnitude is Friday’s non-farm payroll (NFP) at 8:30 am EST.
Then again, NFP hasn’t been much of a market mover of late.
Regardless of what happens Friday, though, the USDJPY is going to need to close below the 108.00 support area to garner the attention of would-be sellers.
I dislike the idea of selling the pair while 108.00 is intact as support.
I’m also not a fan of buying the USDJPY given the rising wedge below as well as the potential bearish engulfing pattern on the weekly time frame.
A close below wedge support near 108.00 would open the door to the next key support at 106.80 with a break there exposing the 105.00 handle.
Key resistance remains that 109.00 region.