USDJPY backs away from long term neckline.

The USDJPY is garnering some attention today as US (and global) equities continue to rally but the USDJPY is failing to comply. Today, however, the tick lower in rates probably have something to do with the USDJPY trading lower, but what about the last month? The USDJPY is finding key resistance just above the 109.00 level (which is the long term neckline of the big inverted head and shoulder’s pattern) as we grind lower towards the 108.50 ascending wedge trend line support. This level is also the 61.8% retracement of the end of October move higher to highs last week. A break of the 108.50 may have some bearish implications near term.

Is the USDJPY leading equities or does this divergence in strength suggest that the JPY may move higher against other majors in the coming sessions? We are unsure of the answers, but the 108.50 will be an important level for the bulls to defend.

Blake Morrow