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Today’s Trading Edge: USD/JPY – Falls on Butterfly Pattern and weak ISM Data

Posted by Edward Moya on Oct 1, 2014 3:21:00 PM

WWM USDJPY OCT 1 2014

The USD/JPY bullish rally took out the 110 barrier last night, but price could be showing signs of exhaustion after today’s weaker than expected ISM data.  Economic activity in the manufacturing sector decreased 2.4 percentage points to 56.6%.  The September PMI reading also showed that employment fell 3.5 points to 54.6.  If we do see a slight miss in NFP, we should not be surprised if we see a deeper pullback with USD/JPY.

Price action is displaying two bearish Butterfly patterns on the both the weekly and 60-minute chart.  This double pattern could support further profit taking and downward pressure on the pair.  I identified this pattern on my last post and still look for the bullish move to eventually target 112.50.  Major support will come from 38.2% Fibonacci retracement level of the C to D leg on the monthly chart, which resides at the 106.60 level. 

The trade: Sell USD/JPY at 109.35 with a stop loss at 109.95 and a take profit at 108.15.  The Risk/Reward Ratio is 1:2

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: usd/jpy Bank of Japan, $USDJPY, usd/yen, USD

 

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