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Yen Futures Await Breakout Catalyst


Yen futures (6J) have been in lock down throughout September, moving in a smaller and smaller range. This sideways price action has created a well defined triangle pattern.  A break from the triangle is likely to signal the next trending move, and that breakout could occur very soon.

On Friday October 2 the US will release non-farm payroll numbers.  The number always has an impact on currencies, but with a potential rate hike from the US in the offing, traders will be especially interested to see whether the employment data makes that hike more likely to come sooner or later.

Watch for a move above 0.008390 to break the triangle to the upside. The height of the triangle (August 31 forward) is 0.000195 in height. Add this to the breakout point to get an approximate upside target: 0.008390 + 0.000195 = 0.008585. That target is just below the August 24 spike high at 0.0086035.

A downside breakout occurs if the price breaks through the lower triangle trendline at 0.08265. Subtract the triangle height to get an approximate target of 0.00807. The target is at the top of a support area which the price bounced off of in June and August.

Figure 1. December Japanese Yen Futures (6JZ5) - Daily Chart

"Whipsaws" are often created around major news events. This is where the price makes a big move in both directions before settling on a more dominant direction. Breakouts which occur seconds after the announcement are less reliable than the more "rational" directional moves which occur after the market has digested the information and the panic and euphoria have passed. 

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