The USD/JPY has been in a narrowing range for the past few years, and on that chart was a chart that had piqued my curiosity for a long time despite the fact that the larger market had been uninterested. The narrowing volatility (wedge formation) was expected to give way at some point, and we look to have finally found a resolution as of last quarter. The USD/JPY currency pair is currently trading above the 2015 and 2017 trend lines (with the latter making up the top of a cleaner-looking wedge pattern). A break above the 2020 and 2019 highs would be a significant development, as it would mark the first time the wedge has been breached (11240). This would also snap the series of lower highs and lows that have been constructed during the last few years. A break over 11240 might trigger a major macro rally, pushing USD/JPY well into the 12000s. If, on the other hand, the wedge’s slipping out turns out to be a false breakout, we could be in for more of the same choppy pattern we’ve seen in recent years. The invalidation point is set at the April low of 10747.
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