USD/JPY Technical Analysis: NFP Brings Volatility but No Breakdown

10/05/2015 9:00 am EST

Focus: FOREX

Though resistance was tested on Friday's weak NFP report, it failed to break, so Tyler Yell, of DailyFX.com, uses technical analysis to outline why he feels that—while short-term traders can play the range—long-term trend traders are better off waiting for the breakout that often takes multiple times longer than most anticipate.


  • USD/JPY technical strategy: 118.40 yet to break though it was tested on weak NFP
  • Institutions turning focus on close of August 24 at 118.40
  • Forming a prolonged triangle. Favors range trading with stop and reverse position

USD/JPY bears got some much-anticipated excitement Friday on a weak NFP print. However, their excitement was short-lived as a break below the 119 handle was soon met with the move back near 120. While the bigger picture is still lower below long-time resistance of 122, the lesson learned Friday is that it's going to take more than one bad newsprint to bring down this pair. Especially with the anticipation of additional BoJ easing potentially being announced on the October 7th or October 30th meeting.

The August 24 open and close continues to hold price-action and we favor consolidation over a breakout until either the open of 121 90 or the close of 118.40 breaks. Within those levels, the overnight high of 120.40 high before NFP looks to act as short-term resistance followed by 121.23. Support above 118.50 could be found on the 119.00 the lowest close after August 24.

There's a time to be aggressive and a time to be patient and aggression has gotten more USD/JPY traders in trouble than patience. Consider that USD/JPY favors consolidation over breakout and you can see that this pair currently favors short-term range trading. Looking back to May 2013, USD/JPY has been consolidating a majority of the time, followed by short-lived breakouts. Short-term traders can play the range, but longer-term trend traders are better off waiting for the breakout that often takes multiple times longer than most anticipate.

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By Tyler Yell, Trading Instructor, DailyFX.com

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