The USDJPY is on the move again.
After months of consolidating, the risk-sensitive pair ripped 250 pips higher this week.
Most of those gains occurred on Wednesday when the pair closed higher by 150 pips, clearing that May 6, 2019 gap at 111.10.
I wrote about this level several weeks ago.
It’s no coincidence that Thursday’s session carved a low of 111.11 before rocketing higher by another 100+ pips.
But instead of talking about trivial details, I want to take a step back today and look at the bigger picture.
I also have no interest in discussing why the Japanese yen did what it did.
The price action is all that matters. It’s the only thing that determines whether an event or outcome is positive or negative for a currency.
Everything else is just noise, in my opinion.
With that in mind, here’s what USDJPY did this past week:
That’s the monthly time frame, but this wedge has been holding up on a weekly closing basis as well.
Like it or not, the risk-sensitive pair is in the process of clearing the top of a wedge pattern that has been around since 2015.
Of course, we didn’t know this was a wedge until much later than that.
But unless this turns out to be a false break, this week’s rally is a significant moment for the USDJPY.
It could very well re-establish the uptrend we saw between 2012 and 2015.
Now, as for key levels to watch for next week, a lot of it will come down to today’s close.
As long as USDJPY can stay above 111.10, that’s the first key support for next week, in my opinion.
We could also see a retest of the wedge top as new support, but that would result in a much deeper retracement.
As for key resistance, this week’s high at 112.25 is one to watch, as well as 113.25 and the previous range top at 114.50.