USDJPY Signs of Recovery, Support at 107
The JPY is on a march higher. The EURJPY is one of the weakest currency pairs on the FX dashboard, sliding from above 126 to below 123 in a matter of days. After forming a triple top formation above 126, the cross looks poised to reverse all the way back to the 120 level and beyond.
The world is closely watching at the political shift in Japan. After Shinzo Abe’s resignation, this past weekend was the first one with Suga as the new Prime Minister of Japan.
He wasted no time and held a foreign policy meeting early Saturday morning. Known for keeping busy weekends, Suga enjoys increased popularity. Suga leans towards a Japan-U.S. alliance both in the way to tackle COVID-19 and North Korea.
Since Abe’s announcement to step down, the JPY strengthened across the board. It decoupled from the classic risk-on/risk-off market moves as Suga’s cabinet popularity suggests Abenomics will have a hard time being implemented moving forward.
The EURJPY cross tried for three consecutive times to break above 127 – it failed at each attempt. The pattern, known as a triple top formation, is one of the most powerful reversal patterns to be found in technical analysis.
Its measured move is only symbolic, coming to confirm the reversal pattern’s presence. The bigger prize for short traders willing to bet on the JPY ahead of the U.S. elections is the 120 level. The round number acted as a pivotal level for quite some time on the EURJPY pair, and it continues to attract price.
To trade on the short side, aggressive sellers might want to enter at market with a stop loss above 125.50. While not a sensational risk-reward ratio, bears may consider moving the stop-loss to break-even by the time the price reaches 121.
To learn more about technical analysis patterns, consider our Forex trading course.
