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Today’s Trading Edge: USD/JPY –Dollar extends gains over 113 as VIX falls to lowest closing level since 2007

Posted by WorldWideMarkets . on May 8, 2017 7:33:00 PM

WWM USDJPY MAY 8 2017.jpg 

Earlier in NY, the U.S. dollar rallied above the 113 level against the yen following comments from two Fed officials.  Fed's Bullard, a dovish non-voter stated that the Fed's current policy rate setting is appropriate and that the US economy looks like it's in a low growth state.  He also reiterated that the Fed does not need to raise rates.  Fed’s Mester, a hawkish, non-voter stated that actions must be taken before Fed policy goals are fully met.  She reiterated calls for further rate hikes and trimming balance sheet this year. 

With global stability stemming from Sunday’s French election, the volatility gauge heads for the lowest closing level since 2007.  The VIX is lower by 32% since the first round of French voting that took place just over two week’s ago. 

The USD/JPY daily chart shows that price formed a bullish Gartley Pattern on April 17th.  Point C was confirmed with the 50% Fibonacci retracement of the A to B leg, while Point D was targeted with both the 61.8% Fibonacci retracement of the X to A leg and the 200% Fibonacci expansion level of the B to C move.  This week, the rally tentatively took out the 100-day SMA.  If we see one last push higher, price may find resistance from the 113.40-113.80 region.  Key support remains the 50-day SMA, which currently trades at the 111.70 level.  If the bullish momentum continues, major resistance lies at the 115 handle. 

The trade: Sell USD/JPY 113.80, with a stop loss at 114.30 and take profit at 112.30.  The risk/reward ratio is 1:3

Topics: $USDJPY, Dollar


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