The overnight price moves for USD/JPY provided whipsaws, stops touched at 102.10, reactions to BOJ commentary and in the end, not a major difference in price.
One of the reasons why dollar-yen remains around the 102 area, is because the Bank of Japan kept their monetary policy plan unchanged. Many analysts believe it is a foregone conclusion that the Bank will eventually need to inject more liquidity. With the hope of spurring economic growth, Prime Minister Shinzo Abe also announced a plan to reduce the corporate tax rate. Public debt is a major issue for Japan and investors are not sure where the government will be able to secure alternative tax revenue.
Currently on the daily chart, price has consistently respected the 2014 trading range of 101-104. My trading bias still remains focused on buying on dips and expecting the 200-day SMA to hold up. Some USDJPY bears have been stopped out on the overnight climb to 102.10, but many will return if we see equities(S&P 500) in NY have a down day around -1.0%.
The four-hour chart is displaying that yesterday’s major move down may have formed a bullish Gartley pattern that may target a rebound towards the 103.50. If price does rally towards that area, we may see a strong respect of the 2014 trading range. Eventually, price should make a run towards the 110 handle by year end.
The trade: Buy USD/JPY at 102.00 with a stop loss at 101.40 and a take profit at 103.50 The Risk/Reward Ratio is 1:2.5
Edward J. Moya
WorldWideMarkets Online Trading