USD/JPY is poised for a big break
USD/JPY finished last week strong with a 75 pip rally in the final six hours of trading. But it's given back 15 pips of that in early trading in tentative sign that it remains in the range it's carved out over the past month.
At the moment, this is a great example of a classic formation. Oftentimes after a quick, large move there is a period of consolidation. It often takes the form of a 'wedge' or triangle as the range narrows.
Inevitably it breaks. The culprit is often confirmation (or rejection) of whatever led the chart to jump or drop in the first place. In general it continues in the direction of the initial break but the trade is to go with a move in either direction.
On Friday, it looked like USD/JPY could be breaking out to the upside. We're carefully watching to see if it can continue higher today and early this week. Confirmation would come on a break of 121.74. That would imply a rally back to the old range near 125.
With quarter-end coming and non-farm payrolls highlighting a major week of economic data, we don't expect to be waiting for long.
