The USDJPY pair has been moving in a downward trend for 5 weeks, the quotes have taken the shape of a descending wedge. Usually this formation is a form of accumulation, during which the quotations fall with a decreasing volume.

An upward wedge usually announces increases. The MACD on the daily chart has entered the ascending phase.

USDJPY daily
USDJPY Daily – price is moving in a descending wedge

The daily candle from Thursday engulfed Wednesday’s range, creating a bullish outside bar – engulfing formation.
The range of formation is 105.95- 106.65. Overcoming one of these levels and breaking out of formation can initiate more dynamic price movements.

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USDJPY H4 – where will the market break out?

In the H4 chart, there is an upward divergence, which may suggest that the breakout will take place in the northern direction. If the wedge resistance is overcome, the increases may intensify.

If there is a break down from the engulfing pattern, it would be equivalent to overcoming the wedge’s support, which could be a strong downward signal. The decision belongs to the market, only then we can join by placing an order in the direction of the breakout from the formation.

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