Early price action for trading week has the U.S. dollar slightly higher around the 110.50 level against the yen. In New York, the Final May Markit Services PMI reading came in at 53.6, lower than the preliminary reading of 54.0. The May ISM non-Manufacturing Composite disappointed with a 56.9 reading, much lower than the eyed 57.1 reading. The April Final Durable Goods orders reading also missed expectations with a -0.8% print, analysts’ eyed a -0.5% decline.
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 topped out on May 10th at the 114.36 level. Price has now fallen below both the 50- and 100-day SMA(s), but is tentatively respecting the 200-da SMA which trades around 110.38 level. If we see one last push lower, price may find support from the 109.50 region. It is around that area that price could form a bullish Gartley pattern. Deeper support would come from the 107.50 to 108.00 zone. Key resistance remains the 100-day SMA, which currently trades at the 112.20 level. If the bullish momentum returns, major resistance lies at the 115 handle.
The trade: Buy USD/JPY 109.50, with a stop loss at 108.50 and take profit at 112.50. The Risk/Reward Ratio is 1:3