Early price action in Asia has the U.S. dollar higher by 0.2% slightly higher above the 114 level against the yen. The greenback is still riding some of the momentum from Friday’s strong nonfarm payroll report. On Friday, the June nonfarm payroll came in at 222,000, well above the 178,000 estimate. The May report was also revised higher. With most signs continuing to point to a stronger US economy, the case for policy normalization will be easier for Fed Chair Yellen. Yellen will deliver her semiannual testimony to Congress on Wednesday.
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 took out the 200-day SMA, and is currently facing a double-top pattern. If we see this level tentatively respected, price may find support from the 113.50 region. Deeper support would come from the 111.00 to 111.61 zone. Key resistance remains the 116.40 level. If the bullish momentum accelerates, major resistance lies at the 119 handle.
The trade: Buy USD/JPY 113.50, with a stop loss at 112.50 and take profit at 116.50. The Risk/Reward Ratio is 1:3