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USD/JPY in Short-Term Descending Channel Correction

February 20, 2021 (Last updated on February 27, 2021) by

The US dollar has been correcting against the Japanese yen since February 17, forming a descending channel pattern. Now, the pattern can serve as a continuation trigger for a greater long-term uptrend in the USD/JPY currency pair.

The image below shows the channel as two declining parallel yellow lines. My potential entry level is a the cyan line, which is positioned at 10% of the channel’s width above the upper border. I will set my take-profit to where the green line is (at 100% of the channel’s width above the upper border). The stop-loss level isn’t shown on the chart because it will be set to the low of the breakout candle. However, if the breakout candle trades mostly outside of the channel, the stop-loss will be set to the low of the preceding candle instead. I will ignore bearish breakouts from this bullish continuation setup.

USD/JPY - Descending Channel Pattern on 4-Hour Chart as of 2021-02-20

I detected this channel using the Channel Pattern Detector indicator and built this chart using the ChannelPattern script. You can download my MetaTrader 4 chart template for this USD/JPY pattern. You can trade it using my free Chart Pattern Helper EA.

Update 2021-02-22 9:14 GMT: As the currency pair rallied at the start of the week, the entry line had been breached and a long trade was triggered at 105.610 about 7 hours ago. The stop-loss is at 105.422 and the current take-profit is at 105.969, which is a subject to change as the TP will be moved down in sync with the decline of the green target line:

USD/JPY - Descending Channel Pattern on 4-Hour Chart as of 2021-02-22 - Post-Entry Screenshot

Update 2021-02-22 18:03 GMT: Despite a strong initial rally, this trade quickly went south, hitting the stop-loss of 105.422 at 13:43 GMT today:

USD/JPY - Descending Channel Pattern on 4-Hour Chart as of 2021-02-22 - Post-Exit Screenshot

If you have any questions or comments regarding this descending channel on the USD/JPY chart, please feel free to submit them via the form below.

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