Early price action in Asia has the U.S. dollar higher and above the 111 level against the yen. In New York, the June Empire Manufacturing index, which is the first factory report released by the regional Fed banks, beat expectations with a 19.8 reading, well above the 5.0 estimate. The Jun Philadelphia Fed business outlook also beat expectations with a 27.6 reading, analysts’ eyed a 24.9 print.
The USD/JPY daily chart shows that price formed a bullish Gartley Pattern in early June. Point C was confirmed with the 38.2% Fibonacci retracement of the A to B leg, while Point D was targeted with both the 78.6% Fibonacci retracement of the X to A leg and the 141.4% Fibonacci expansion level of the B to C move. The rally tentatively took out the 200-day SMA, and is testing the 50-day SMA. If we see this level respected, price may find support from the 109.50 region. Deeper support would come from the 107.50 to 108.00 zone. Key resistance remains the 100-day SMA, which currently trades at the 111.87 level. If the bullish momentum returns, major resistance lies at the 115 handle.
The trade: Buy USD/JPY 110.50, with a stop loss at 109.50 and take profit at 113.50. The Risk/Reward Ratio is 1:3