USD/JPY has been consolidating tighter and tighter inside a descending triangle chart pattern on its daily time frame. This suggests that sellers are trying to push the pair lower but that buyers just won’t let up.
A break in either direction could last by as much as 400 pips, as the chart pattern spans from the peak around 105.00 to the support just above the 101.00 major psychological level.
The pair is just testing the bottom of the triangle and might be due for a quick bounce back to the top around the 102.50 minor psychological resistance. This pair could be in for more volatility or a clearer direction as the BOJ is set to make its monetary policy decision this week while the FOMC will release the minutes of its latest policy meeting.
Using a straddle setup for this swing trade idea might work, with a buy order above the 102.50 handle and a sell order below 101.00.
By Kate Curtis from Trader’s Way