USD/JPY poised for sharp move as rates test key level
Fawad Razaqzada October 22, 2019 11:21 AM
While the underlying trend is still arguably bullish for this pair, the bigger move may come if the breakout fails.
Today I am once again drawn to the USD/JPY’s price action. Not that it has moved a lot – far from it – but because there is the potential for a sharp, technically-driven, move. As mentioned, rates haven’t moved much higher after breaking through 108.45 key resistance last Tuesday. The USD/JPY managed to make a high so far of 108.95, before returning back to this breakout level. Its next move will be important so far as the technical considerations are concerned:
- If the USD/JPY manages to cling onto the 108.45 today and posts a bullish-looking daily candle here, then that would suggest the buyers are happy to remain in control. As such, they may go on to drive the exchange rate higher, possibly beyond the 200-day average and recent high of 108.45, over the coming days. There is even the potential that the UJ could go on to achieve much higher levels over time.
- If the bulls fail to sustain the breakout, then the long-term bearish trend could resume here. So, watch out for a potential closing break below the 108.45 level today or in the coming days. The deeper the potential close away from this level, the better it would be for the bears. If this scenario plays out, rates could drop to the next potential support at 107.65 or possibly go on to re-test the more significant 106.80 level next.
Source: Trading View and FOREX.com.
So, the USD/JPY is currently trading around a pivotal technical juncture. This means that whichever direction it eventual goes, there may well be some momentum behind it which could potentially lead to a sharp move in that direction. While the underlying trend is still arguably bullish for this pair, the bigger move may come if the breakout fails. Remember, false breaks often lead to fast moves in the opposite direction.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.