A wedge pattern is set up in USD/JPY on the hourly chart.

This pattern usually signifies consolidation after a big move and that is exactly what we saw in this pair over the past week.

The wedge formed after a new 14-year low in the pair on Friday. In today’s trading it has consolidated in a tightening pattern as Japan’s non-intervention statements clashed with declining risk appetite.

Generally, a wedge pattern sets up a big move, normally in the same direction as the previous move. In this case, a break of the supporting trendline could initially target the 14-year low of 84.43.

The key level on a rebound will be 87.53, which is the 61.8% Fibonacci retracement of the down move. A break above that would open the way to a return to 89.19.

The bias has be toward more U.S. dollar weakness but if there was a time to see a big gap lower in the greenback it might have been today. Most charts were set up very bearishly for the dollar at the start of the session but buck held its ground.

On the other hand, USD/JPY was set up quite bullishly after the turnaround on Friday. That generated a massive reversal signal but the follow through has been lackluster.

What’s important to keep in mind is that Thursday and Friday trading came on low volume because of the U.S. holiday. Undoubtably, that created some confusion in the market and some mixed signals. In the next 24 hours, we should see some clairity.