The U.S. dollar sold off early in Europe to the Japanese yen and was unable to regain traction after today’s Fed day. Price weakened to 102.13 at 10:45 AM EST and started to crawl higher after the 2pm Fed Statement. While the tapering of asset purchases continue despite a surprise miss in GDP, the range for USDJPY appears to be fairly intact as we will need to see a few solid months of US data before this trade has its next major leg higher.
Price closed below the 50-day SMA and appears to be trapped by the 102-103 range. Major support lies at the 200-day SMA which currently is at 100.92. Eventually, the bullish trend will firmly reestablish itself. Until we get through the majority of the summer, price may trade between 101 and 103.50.
The 240-minute chart shown above displays two potential patterns A bearish butterfly pattern and bearish Gartley pattern may be forming around the 103 handle. If price does rally towards that area, we may see a strong respect of that critical resistance zone. Downside ay minimally target the 102.40 level.
The trade: Sell USD/JPY at 103.00 with a stop loss at 103.35 and a take profit at 102.30 The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading