Jump to content

USD/JPY Technical Analysis: Explosive Price Pattern Forming at 20-yr Highs


Recommended Posts

Jun 23, 2022 | DailyFX
Paul Robinson, Strategist

USD/JPY TECHNICAL HIGHLIGHTS:

  • USD/JPY is carving out a rising wedge pattern at 20-yr highs
  • Downside break could lead to quick losses
  • An upside breakout is seen as being potentially terminal

USD/JPY Technical Analysis: Explosive Price Pattern Forming at 20-yr Highs

USD/JPY price action is contracting as it runs higher and this is leading a rising wedge formation. We aren’t quite there yet with its maturity, but will be soon. This is also developing around two decade-old resistance in the 135s, which makes it even more interesting.

The nature of these patterns is that they often times lead to reversal of trend for at least a strong corrective period, but that isn’t always the case. The patterns can lead to sharp breakouts in-line with the trend, but these often prove to be a final ‘hurrah’ before reversing.

Either way the pattern is viewed through the lens of arriving near the beginning of the end of the trend. Again, at least for a period of time while the market digests the long run prior to the forming of the rising wedge.

First, looking at the bearish scenario. A breakdown out of the pattern by taking out the underside trend-line often times leads to a sharp decline as the market is caught leaning the wrong way. The combination of an extended trend and contracting volatility can be an explosive one. If this were to play out then look for USD/JPY to fall as far as the bottom of the pattern in the 126s in fairly short order.

On the flip-side, if we see USD/JPY squeeze out of the top of the pattern then a burst higher could develop, but is likely to be short-lived as the market quickly runs out of gas. Again, the combination of an extended trend and wedging price action often leads to an explosive outcome. In this case, the move higher is likely to be transient even if it is powerful.

You can’t rule out a fake-out breakout to kick off the move, that is a swing in one direction that is quickly reversed and takes out the other side of the pattern. These are typically easier to play if the top-side is the head-fake since the market is already quite long and provides plenty of fuel (sellers).

I would estimate we are within a week of seeing which way this wants to unfold. Running with the initial breakout, but if we see that breakout turn out to be false then flipping the bias with the momentum.

 

USD/JPY DAILY CHART

usd/jpy daily chart

USD/JPY Charts by TradingView

Resources for Forex Traders

 

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      22,164
    • Total Posts
      93,079
    • Total Members
      42,567
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    sspotanin
    Joined 10/06/23 09:22
  • Posts

    • Why isn't there a way to set options stop loss on IG platform?  Are you planning to implement this feature?
    • Hi,  I started trading Brent Crude Oil in IG platform but I could find a formula to correctly calculate the size I have to put while creating a position, based on the available amount I have. The quotation is based in points and it makes me wonder how operate. Any help is welcome.  Also, I plan to work with some leverage in the future, so any tip on this matter is also welcome.  Thanks.  
    • Greetings fellow traders, I am thrilled to share an exciting intraday trading idea for EURAUD that could potentially boost your profits. At Gold Signals by Professor, we have conducted a thorough technical analysis and confidently recommend a Buy position for traders like you. Our analysis indicates a significant development: EURAUD has managed to sustain itself above the crucial level of 1.60927. This breakthrough suggests a positive momentum, with potential targets at 1.61500 and 1.61800. To mitigate risks, we advise setting a stop loss around 1.60375. In order to maximize your trading success, it is vital to stay well-informed about the latest news and events that may impact the FX market. Factors such as global economic conditions, geopolitical tensions, and central bank policies can influence the price movements of EURAUD. Please note that the momentum of the trade can be influenced by unforeseen events or news. Therefore, we will be updating this level regularly in our channel to ensure you have access to the most recent trends and analysis of Gold and its trading potential. Wishing you all a prosperous day filled with successful trades!
×
×
  • Create New...