Earlier in NY, the U.S. dollar rallied following the release of ADP employment change. ADP’s private-sector employment report increased by 253,000 from April to May on a seasonally adjusted basis, shattering the market expectations of 180,000. The service-providing sector had its 88th straight month of increases, 185,000, a rise from the prior month reading of 165,000.
The greenback rally however was attributed more to a consolidation of losses, rather than a confirmation that Fed expectations will deliver a rate hike later this month.
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. The rally tentatively took out the 100-day SMA, but stalled from the 114.50 resistance level. Price now trades around the 50-day SMA and if we see one last push lower, price may find support from the 109.50-110.00 region. Key resistance remains the 100-day SMA, which currently trades at the 112.27 level. If bullish momentum returns, major resistance lies at the 115 handle.
The trade: Sell USD/JPY 109.50, with a stop loss at 108.50 and take profit at 112.50. The risk/reward ratio is 1:3