The U.S. dollar remained bid following the FOMC Minutes from the September 20-21st meeting. The Minutes highlighted that a reasonable case was made for both hiking and waiting. Several voting Fed policymakers also though rates should rise relatively soon.
The Minutes also noted that participants expressed concern that continuing to delay an increase in the target range implied a further divergence from policy benchmarks based on the Committee's past behavior or risked eroding its credibility, especially given that recent economic data had largely corroborated the Committee's economic outlook
The USD/JPY daily chart shows yesterday’s rally took the pair to a near 6-week high. Price is now trading above both the 50- and 100-day SMA(s). If the bullish move continues the next key resistance level will be the 105.40 region. It is around that area price could form a beairhs Gartley pattern. Point D is targeted with the 78.6% Fibonacci retracement of the X to A leg and the 127.2% Fibonacci expansion level of the B to C move. If the bullish stance ignores the potential reversal pattern, further upside could target the psychological 110 handle.
To the downside initial support will come from the 100-day SMA, which currently trades at 103.37. Major support lies with the 50-day SMA which currently tests the 101.89 level.
The trade: Buy USD/JPY 103.90, with a stop loss at 103.90 and take profit at 105.40. The risk/reward ratio is 1:3