On February 25th, I wrote about a possible USDJPY false break.
The idea started following the aggressive pullback to the multi-year wedge top between the 21st and 25th of February.
Anytime you see an immediate retest of new support or resistance like that, there’s a decent chance it’s a false break.
Then, on February 27th, the USDJPY confirmed the false break with a sub 109.80 daily close.
109.80 represents the top of a wedge pattern that dates back to 2015.
Since that 109.57 close on the 27th, the USDJPY is down 275 pips.
We also saw the risk-sensitive pair take out ascending channel support near the 109.00 handle on the 28th.
In a recent members-only video, I pointed out the potential for a move to 106.80, and perhaps the multi-year wedge support between 105.50 and 106.00.
However, I also said that a run at the 2016 lows at 100.00 was a genuine possibility.
That hasn’t changed.
As I always say, a false break to one side of a pattern (such as a wedge) usually triggers an extended move in the opposite direction.
For the USDJPY, that means a move lower into wedge support between 105.50 and 106.00 and perhaps that 100.00 handle.
But that multi-year wedge support probably won’t go down without a fight.
All in all, though, I remain bearish the USDJPY while inside the wedge pattern I wrote about on February 25th.
I also favor a move into 105.50 to 106.00 with a break there, exposing the 2016 lows at 100.00.
The only thing that would negate the bearish scenario for me would be a close back above the wedge top near 109.50.
But my base case for USDJPY is for lower prices over the coming days and weeks.
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