In Zurich, NY Fed Chief William Dudley sunk the US dollar after his comments suggested uncertainty existed as to whether the Fed will raise rates in September. He said, "I don't know when the Fed will hike rates.
Earlier in London USD/JPY made a session low at 119.84 and now remains rangebound around the 120.00 handle. So far this year, price action for the curreny pair has remained trapped by the 116-122 range. The daily chart above shows that the longer-term bullish trend is still above the 200-day SMA, but actively struggling to trade above the 50- and 100-day SMAs.
Eventually, a bullish breakout is expected and price may target the 125.00 handle before settling back towards its current levels. In the event, risk aversion runs wild, major support for USD/JPY will come from the 117.70. It is around that area that a bullish Gartley pattern may emerge.
The Trade: Buy USD/JPY at 119.75, with a stop loss at 119.25 and take profit at 121.75. The risk/reward ratio is 1:4.
Edward J Moya
Senior Market Strategist
WorldWideMarkets Online Trading