The USD/JPY recently cracked the 2014-high of 121.70, but failed to maintain the breakout and instead stalled and retreated. Let’s take a look at this failed bullish breakout, and whether we should turn bearish.
The daily chart shows the failed breakout, which can often signal a trend in the other direction, especially if the failed breakout was against the trend. In this case however, the breakout would have extended the prevailing trend, so let’s not be so quick to jump on the bearish outlook. In the short-term, there might be some downside risk, but let’s monitor the 118.23 area. This was a previous support and represents the central pivot of the multi-month consolidation USD/JPY has been developing.
If price holds above 118.20, there should still be pressure to the upside. A break below 118.20 however opens up the 115.56-116 consolidation lows. A break below 115.56 then opens up the 112 handle and the 200-day SMA just below it.
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