USD/JPY in a Wedge Waiting for Trump

Tomorrow Donald Trump will deliver  “State of the Union” to a joint session of Congress and this is expected to be an influential event for the markets, well at least for the USD, indices and Gold. Ahead of that, USD is a bit lower. The hype from the previous weeks vanishes as traders are having some doubts about all that stimulus package coming from the White House. To stop the recent downswing and start the bullish reversal, we need a hard data tomorrow, we need to see specific proposals and not just promises. Any other than that will be bearish for USD and in the same time for this pair.

Technically we are still bullish. USDJPY remains in the up trend started in June. The price reached the red downtrend line and bounces from it. So far, everything seems to be under control. The price is locked inside the wedge formation (blue lines), which is a trend continuation pattern. What is more, we are still above the 38,2% Fibonacci level, which is showing us that the recent drop is not big if we look at the big picture. As long as we stay above the green area, the sentiment is positive but there is no definite buy signal here. This one can be triggered once the price will break the 23,6% Fibonacci and in the same time, the upper line of the flag. That will be definitely a positive sign for buyers. Chances for that breakout are now limited, I think that first we will have to test the closest support (green) and test the foundations of the trend seen in the second half of the 2016.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis