Earlier in NY, the U.S. dollar rallied against the Japanese yen on strong technical buying. Some of the gains were erased following the Fed’s Beige Book, a collection of anecdotal evidence from 12 Federal Reserve Banks.
The Beige Book highlighted that economic activity increased across all 12 districts at a modest to moderate pace and that prices on balance rose modestly from last beige book. It noted that the labor markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply.
The USD/JPY daily chart shows yesterday’s rally stalled right at the 200-day SMA. If we see one last push lower, price may find support from the 107.50 level. It is around that area that price could form a potential bullish Gartley Pattern. 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. If the bearish move accelerates and breaks the 107 handle, support may come from the 105 zone. If the bullish move returns the next key resistance level will be the 112.10 level. Major resistance will come from the 113.90 to 115.50 region.
The trade: Buy USD/JPY 108.75, with a stop loss at 107.75 and take profit at 111.75. The risk/reward ratio is 1:3