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Today’s Trading Edge: USD/JPY: downward pressure may gain momentum as 50-day SMA is respected

Posted by Edward Moya on Jan 27, 2015 12:55:00 AM


The USD/JPY daily chart above displays the recent attempt to recapture the 50-day SMA after climbing from a double-bottom chart pattern around the key 116.00 support level.  The currency pair’s record advance from the 77.00 region all the way to last month’s high of 121.84 appears poised for a potentially deeper pullback

The excessively easing BOJ may need to find other methods of fighting deflation as concerns are growing that not enough action is taking place in reducing public debt, which is twice the size of their economy.  Tonight, Japanese Economics Minster Akira Amari told reporters that the BOJ may have some flexibility reaching the 2% inflation target because of the recent collapse with oil prices.  The bank may need to reduce its inflation target again over the next couple of months.     

Overall the bullish trend since the October 2011 low of 75.56 has only had a few major retracements.  If the downward move accelerates, key support will come from 115.48, which is the 38.2% Fibonacci retracement level of the last major rally.  If that area does not hold, further support will come from 100-day SMA at 114.06. 

If USD/JPY bullishness returns and we see a weekly close above the 120 level, key resistance will come from the 125.00 level. 

The trade: Sell USD/JPY at 118.30 with a stop loss at 119.20 and a take profit at 115.60.  The Risk/Reward Ratio is 1:3

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

Topics: usd/jpy Bank of Japan, $USDJPY, DXY, USD, 10-year US Treasury, 10-year Treasury


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