This is a decent example of a wedge figure. The pair has reached the support and resistance trend lines four times, and after the breakout it has retraced in order to test the support trend line it broke out below, then it started falling again.
In the best case scenario USD/JPY will reach the limit of the wedge, which is its height at its base, i.e. 120 pips. Should that happen, the pair will drop to around 110.20.
We should not forget, however, that wedges are characterized by numerous false breakouts, and that their limit is not always reached.
Still, considering the fundamental factors which have an effect on the USD, this time we could see it reach said limit.
In the alternate scenario, the first target to the upside should be around 112.00.
Great observation!
ReplyDeleteGood insight.
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