Last week's temporary fake breakout above the 104.00 handle for USD/JPY did not have the follow through in breaking out above the 2014 trading range, as private sector job growth lags and the overall improvement in the labor situation in the U.S. is tepid. Price saw a respect of the bullish channel that was formed in the beginning of February. The economic data is not strong enough for analysts to raise their forecasts on when the Fed will tighten and without that, USD/JPY may have difficulty accelerating higher.
The double bottom pattern last month provided major support for the pair at the 101.00 level and sparked a 300-pip rally. Key support now lies at the 50-day SMA at 102.40, if we see this area taken out by a major risk-off event, downward targets may include the 100.74 level.
Upside targets include a return to the 104 zone and a couple of tests of the upper boundary of the regression channel which is displayed in blue. Eventually a run towards the 105 area may be targeted but price may stall out at 104.80.
The trend for this pair is expected to be choppy but mainly bullish.
The trade: Buy USD/JPY at 102.82 with a stop loss at 101.32 and a take profit at 103.82 The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading