USDJPY — Fake Breakout? USD weakness adds caution

USDJPY is attempting to break out to the upside. However, this seems to be driven by JPY weakness, not USD strength. All USD pairs are heading down. This makes it unlikely that USDJPY will successfully break to the upside. I wouldn't short based on this, but I will avoid going long until USD starts to regain some strength. It is unlikely for a healthy trend to start on weakness.

Long term, the situation is still bullish according to Ichimoku. I'll wait for USD strength as a confluence before considering going long. Neutral for now.

Note

For visual learners, take a look at #USDJPY vs #CADJPY vs #GBPJPY vs #EURJPY. USDJPY is very choppy and uncertain. The others are heading up in clean lines. This is relative strength in action. When #USD is weak, moves on #USDJPY are not going to be as powerful or smooth.
View my Twitter thread for full analysis: twitter.com/IchimokuCorner/status/1539166316166189056

Note

Take a look at EURJPY next to USDJPY:

EURJPY is moving up in a clean line. USDJPY is having a lot of difficulties. It doesn't get much clearer than this. Yes, you should look at taking a trade against JPY weakness right now, but USDJPY does NOT look like the pair to long today.

Note

USD has strengthened past JPY in the past hour while USDJPY itself has continued to move upwards. We could see continued upwards movement of this pair as the day goes on. EURJPY is still looking stronger, but this could change if USD strength continues to rise. Keep an eye on DXY and EURUSD. If EURUSD goes down, it could be an early sign that USD strength is back and USDJPY could go higher.

Since USDJPY has been trying to head higher, a reversal of USD strength (e.g. MORE USD Strength) could lead to a very large move. The situation is always dynamic so keep an eye on how USD is shaping up by looking at DXY.

Situations as I see them:
1. USD stays weak, JPY stays weak -- USDJPY may head higher but you'll get better risk:reward on other pairs, e.g. EURJPY
2. USD reverses up, JPY stays weak -- USDJPY may head higher. This could be a good risk:reward trade.
3. JPY regains some strength -- All JPY pairs go choppy. Monitor JPYWCU for any upwards movement.

All currencies are interlinked. Keep an eye on how the macro view is changing and it will help with your analysis.

Note

JPY is getting REALLY weak today. If you're not already looking at JPY pairs for long trades, you should start.

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