USDJPY breakout or fakeout?

The USDJPY is going to be put to the test in the coming sessions. With yields on the rise following the FOMC minutes today and stocks selling off as a response to higher rates, the USDJPY will be put to the test in a big way. One half of traders would argue that the USDJPY rallies sharply when yields move higher. The other half would argue that the JPY tends to strengthen should we see some “risk aversion.” To be fair, I think both groups of traders are right. But who will be “more right” if stocks go down as yields surge higher?

Technically, the USDJPY has broken the key 115.50 level and just hit new trend highs at the 127% extension at 116.35. A break back below the 115.50 level would sure be a disappointment for bulls and near term bearish. In addition, the 161% extension of the December consolidation comes in at 117.39 which also coincides with a multi year descending trend line. If the USDJPY does surge higher, I would expect this as MAJOR resistance. Good enough for a counter trend USDJPY short, if you ask me.

Blake Morrow