Recent profit taking has helped trigger a round of yen strength across the board. With no major catalyst behind this move, traders will be eyeing opportunities to reenter their long USD/JPY trades. The next major event for the currency pair will be next week’s FOMC which many are expecting no action in the reduction of stimulus that is being applied to the economy. The optimism in the U.S. economic recovery will likely be highlighted by the Fed and the end result could see further upside for USD/JPY, despite no beginning of the eagerly expected taper.
Price action on the 30-minute chart is displaying the recent round of weakness that started late Monday night after price stalled at the 103.38 level. Early this morning, price has tentatively respected the 50.0% Fibonacci retracement level of the 176-pip rally that started from Friday. The rebound however is not lasting and is currently pulling back towards the lows of the London session.
With the next round of USD/JPY selling taking place, traders may look to see a bullish reversal at the 61.8% retracement level, which is also highlighting the potential point D in both the bullish butterfly and Gartley pattern.
The trade: Buy USDJPY at 102.29, with a stop loss at 101.97 and a take profit at 102.95. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading