USD/JPY fell during the Thursday session as the Dollar lost ground against many of the major currencies around the world. The pair has been forming a massive triangle over the last several weeks, and the bottom support line is currently being testing by this latest move.
The Triangle is actually an ascending triangle which is normally quite bullish. A break below the supportive line would be massively bearish and with the overall trend. Because of this, we are very willing to sell this pair if that is what happens. However, there is a resistance line at the top of this triangle at roughly 78.50 which would be a classic buy signal. We however, will not be buying this pair either way.
Beyond the obvious trend to the downside overall, this pair also has a massive resistance line at 80 that would have to be overcome for us to be comfortable in buying this pair for any length of time. The intervention by the Bank of Japan on October 31st didn’t manage to close above the 78.50 level, and the markets have struggled to stay above that area since. With that being the case, it is hard to understand how the market can close above the 80 mark, hence our weariness of buying.
However, if we can break to the upside, we think this would only be a great opportunity to sell if we cannot get above the 80 mark. In fact, it quickly becomes a binary trade at this point as a move above it is a massive buy and hold signal, and any signs of weakness as we approach that level would only confirm the massive resistive qualities of that level. In our opinion, selling on exhaustive candles at 80 is the closest thing to a “sure bet” as there is. As mentioned above – if we do and the market keeps rising – something has changed and we are ready to just flip our trade and buy at that point. The market will certainly have to make some kind of decision soon, and because of this, we will be waiting for our signal which for now will involve selling this pair either higher, or below this triangle.
Written by FX Empire