USD/JPY Technical Analysis: Flashing red below 200-day MA, down 20+ pips in Asia

• USD/JPY has trapped buyers with a false breakout above the 200-day average. 
• The pair is trapped in a rising wedge pattern on the daily chart. 

USD/JPY is currently trading at 108.74, representing a 24-pip loss on the daily open of 108.98. 

The currency pair is losing altitude amid the moderate losses in the US index futures. At press time, the futures on the S&P 500 and Nasdaq are reporting 0.12% and 0.17% losses, respectively, as doubts have re-emerged over prospects of the US-China trade deal. 

Technically speaking, the currency pair has tapped the bulls on the wrong side of the market in the last 48 hours. The pair closed above the 200-day MA on Tuesday only to fall back below the long-term MA in the overnight trade. 

Also, the pair is trapped in a rising wedge on the daily chart. It comprises of converging ascending trendlines drawn from higher highs and higher lows. The converging nature of trendlines represents buyer exhaustion. Hence, a rising wedge breakdown is considered a bearish reversal pattern. 

In USD/JPY's case, a close below the lower edge of the wedge, currently at 108.09, would confirm breakdown and open the doors for 106.48 (Oct. 3 low). 

On the higher side, acceptance above 109.25 (Tuesday's high) is needed to revive the bullish view. 

Daily chart

Trend: Bearish

Technical levels