The last key statistical release of the week was unable to give the dollar a boost above the 102.00 level as U.S. business equipment orders increased 0.7% versus a forecast of 0.5%. Despite the headline beat, non-defense capital goods excluding aircraft declined 1%. Many feel that business investment might be weaker in the coming months and the result did not allow the dollar to have that last key surge higher.
The daily chart shows the key 101.00 support level has so far been respected all year. With thin markets anticipated as we approach the month of August, stop runs penetrating this key level could be temporary. The fundamental backdrop behind dollar yen remains very bullish. The Fed is unwinding their QE program and the BOJ may increase their stimulative measures. Yields for U.S. treasuries remain stable and higher yields will only help dollar bulls.
The current slide for USDJPY may eventually target the 101.50 level, which is the 50.0% Fibonacci retracement of the July low to this week’s high move. Important support remains 101.00, but if we do see a stop run, 100.50 might be the key level. To the upside 104 remains critical resistance.
The trade: Buy USD/JPY at 101.50 with a stop loss at 100.95 and a take profit at 103.40 The Risk/Reward Ratio is almost 1:4
Edward J. Moya
WorldWideMarkets Online Trading