USD/JPY – The Classic Breakout versus Clear-out Dilemna

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USD/JPY - The Classic Breakout versus Clear-out Dilemna

The USD/JPY started this week failing to break above the 110.00 handle and retreated, breaking below the previous low on the month which was at 108.00. However, this breakout is still premature, and there is a possibility that this is a clear-out, which would suggest a bullish continuation. How can we assess whether this is a breakout or clear-out?

Basically, we can monitor today’s consolidation between 107.75 and 108.55. A break above 108.55 favors the clear-out scenario, but if price holds below 109.00, the pressure is still downside, and the breakout can still happen. A break above 109.20 would be a strong bullish continuation signal. A break below 107.75 however favors the breakout scenario, which suggests some consolidation with downside risk to the 107.00 handle and common price during a previous consolidation in mid-September. Below 107.00, the previous 2014-low at 105.44 comes in play as a possible support. Let’s wait to see how the market react after the FOMC minutes, due 2:00PM ET today (10/8)

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.