USDJPY Triangle Still Holding, Breakout Soon – July 24, 2014

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USDJPY Triangle Still Holding, Breakout Soon - July 24, 2014

USDJPY Triangle Still Holding, Breakout Soon - July 24, 2014

The USDJPY triangle pattern that traders have been watching for quite some time already is holding still, but the odds of a breakout in either direction have been running high. Price recently bounced off the bottom of the triangle near the 101.00 handle a couple of times and tested the triangle resistance later on.

Risk aversion is triggering safe-haven flows for the past few days, as geopolitical tension have clouded the financial markets trading, forcing the USDJPY triangle consolidation to hold for the time being. Sanctions imposed by the EU and US on Russia could have significant repercussions on global economic performance while the conflict in Gaza is also keeping the lower-yielding dollar and yen supported.

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USDJPY Breakout Direction

Monetary policy differences and economic performance could give clearer clues on which direction the breakout might go, but it appears that the US and Japan are also at a standstill. While the Fed is carrying on with its taper, it has released a cautious monetary policy bias and Yellen refuses to give a timeframe on when they might tighten. Meanwhile, the BOJ has been insisting that the Japanese economy is resilient and that it continues to recover moderately despite the negative impact of the sales tax hike.

An upside break from the USDJPY triangle could be confirmed by a strong green candle closing above the 101.50 minor psychological level. On the other hand, a downside break could be made after price closes below the 101.00 handle.

Gains could last by as much as 300 pips or until the 104.50 minor psychological level if there is an upside break while losses could also take by as much as 300 pips or until the 98.00 major psychological support if the USDJPY triangle bottom fails to hold. There are minimal event risks lined up this week though, as traders might need to wait for next week’s set of data before seeing a clearer direction.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.