The last three days have shown that the rally might have hit a wall

The natural reaction to seeing a strong move in a pair is that you don't want to miss out. That's a risk if you go chasing as you can find yourself buying a top or selling a bottom.

On the other side, there's always the temptation to try and pick the top or a bottom for a reverse. Both can be fairly dangerous strategies for your account, unless you trade them properly. In the run up in USDJPY there were two main points to try both strategies, the 107 level, where we had the big offer, and then subsequent break, and similarly at 110.00. Both provided a lower risk trade.

Now it looks like the rally has hit a road block. It may be temporary or it may be longer lasting. Only time will tell but the art is not guessing what may happen but watching what is happening.

USDJPY daily

We've now struggled to break and hold above 111.00 and that action is one of the first things I look for when judging a trend, "Where does the price really hit a wall?". As I say, this could be temporary or it could be were we see a deeper retracement. The longer we continue to hold this resistance area, the greater the chance we see a bigger fall. At the moment, that would obviously have to break 110.00 and more so 109.75/80 just for added confirmation.

What does the fundamental story tell us?

I should think that some of the election heat has cooled and whatever money was sitting on the sidelines has now been placed. Once again, time will tell. A Dec Fed hike has now been long expected so there's probably very little room in that trade. Even so, it's probably unlikely that we can move a great deal south just because we have the Fed meeting fairly soon but that could still be where we find some air pockets if tested.

Right now I suspect we'll see some consolidation in the pair. We may have another look above 111.00 or south of 110.00 but I don't think we'll get anything that goes too far. For shorts, there's an opportunity against the highs, and maybe that 111.40/50 area, which can be kept tight against the April highs around 111.80/85, maybe even 112.00 if you wanted to push the boat out.

Buyers could look at 110 but would perhaps need to keep it fairly tight to the 109.75 level as a break could see a swift move to the low 109's. 108.80 looks like the near support under 109.00 and 108.50/55 is the strongest looking area under there.

Patience is what's needed now. Pick your spots and your levels and trade them accordingly. Don't over stretch because if we are going to see another big jump or a deep retracement, you want to have your trades ready for it.