So back in late July we saw that the 108.50 – 109.00 area was serving as a yuuuge support level for USD/JPY. Well, it looks like the odds turned are turning in favor of a downside break after all!
As you can see on the chart below, USD/JPY just hit lows it hasn’t seen since mid-2016.
But while it’s tempting to jump in on the downtrend, I think I can enter at a better price. The previous 108.50 support is looking pretty shiny right now, since it’s also near the 38.2% Fib, bottom weekly ATR, and last week’s lows.
A breakout also makes sense fundamentally. A few weeks ago traders were pretty optimistic that the congressmen and women will make use of their fresh-from-vacation energy to advance Trump’s pro-growth projects AND work on a deal to lift the debt ceiling. The Fed was also a source of good vibes thanks to its plans to put “balance” back in its balance sheet.
Fast forward to today and we’re left with the debt ceiling can kicked further down the road. Not only that, but there are also speculations that the Fed might not raise its rates for a third time this year at all to make room for post-hurricane economic recovery. Yipes!
For now, I’ll be watching the 108.25 – 108.50 area for a possible entry. I’m planning to risk half a position and maybe add another half once the pair makes even lower lows for the year.
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