USDJPY is reaching strong upside resistance of 136.50 which is also a 38.2% Fibonacci retracement of the swing down. A break above this level is required for the upside continuation and a test of the more important 139.50 upside resistance. It is also at the top of the channel.
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On the weekly USDJPY chart, we see a downside channel forming with a strong resistance of 136.50. As we saw from the monthly chart only a confirmed break above this level at this stage would invalidate the downside extension. Now the most important levels in the coming weeks are 137 followed by 139 on the upside and 136 on the downside.
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As the famous trader says…
“If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.”
Bill Lipschutz
How to trade this?
It is obvious that for Q1 2023, we have this upside resistance of 139 which should be broken for an upside continuation. This means that now short trade entries have some advantage over long trade entries as the overall trend is still a downtrend. You should open a short trade, not so big in size with a close stop loss order just above 137 to target 128.50. The risk to reward on this trade is higher than 4 and the timing of the trade could be Monday NY session.
