The Federal Reserve is widely expected to keep the Fed Funds rate unchanged at the 0.25%-0% range, a record low. Indeed, the Fed continues to anticipate that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time”. However, the FOMC statement released has the potential to help the U.S. dollar should the Fed acknowledge the US economy expanded in the previous quarter and inflation pressures may be building up as commodity prices rise. So, I will be looking for opportunities to sell-short the EUR/USD with a limit order at 1.4850 and a stop in a daily close above 1.5105 for 300 pips in profit potential. As always, please make an intelligent use of leverage and always use stops.

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I still like the USDJPY to the long side, albeit longer term and in small size from these levels.  "The bigger picture pattern is constructive. Either a triangle or complex correction is underway since December 2008.  The next leg should be up towards 101.50 (maybe even above).  I laid out a possible scenario for price action since 88 last week, which seems to be playing out.  One possibility is a leading diagonal as either larger wave A or 1 from 88 to 92.35.  A larger B or 2nd wave is underway from 92.35.  That correction may be complete at the ‘panic low’ that occurred Sunday night."     

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EURCHF - I'm staying long from 1.5129. Currently, the pair is still holding within a frustrating region of congestion marked by the 200 SMA, 100 SMA, and 50 SMA. Meanwhile, rising trendline support just below 1.5100 gives us pretty good risk/reward levels, especially since a massive triangle formation (falling trendline 1.5195/1.5200) signals breakout potential. I've placed a stop below the September lows, and I'm targeting the 50% fib of 1.6827-1.4298 at 1.5561.

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On friday I advocated tightening risk on the EURJPY short, protecting against risk of excessive pullbacks. I think it's still reasonable to remain short, but the position should be cut out on a break above 136.01. 131 is the short-term profit target.

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Last week, when I was scanning the yen crosses, the Japanese currency was still on the rise and the boundaries to very distinct wedge formations was in sight. Finding significant follow through, my EURJPY short would end up hitting its second objective; but my NZDJPY setup proved hasty. The short-term rising trendline that defined support for the past two months would ultimately break and the pair fell all the way to the bottom of its much larger congestion formation.

Looking at how various yen crosses have played out over the past week, it is clear that large technical ranges and anchored risk appetite have worked in favor of definable swings and therefore unique trading opportunities. However, it is not a good time to jump into any specific pairs right now. The most appealing congestion patterns (CHFJPY, NZDJPY and EURJPY) have already tagged their respective support levels in multi-month rising trendlines and are now in the middle of their subsequent ranges. Other pairs like USDJPY and GBPJPY offer unique potential; but without remarkable levels and considering their is significant event risk in the near-future, they do not make for high probability setups.

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The daily USDJPY chart is showing the makings of a Head and Shoulders bottom with a neckline at 92.15. I will look to enter long on a daily close, initially targeting 94.00.

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Staying short the USDJPY last week was fruitful as the pair would hit my target of 89.25-10/15 low. The pair has started to erase its losses but is finding resistance at the 50-Day SMA at 90.96. A break above the level would be a bullish sign and lead to a long position with 92.31-10/27 high as my target. However, I will sit in the sidelines until the FOMC rate decision today as it has implications for long-term dollar sentiment.

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Following up with the GBP/JPY short recommendation from earlier this week, the pound-yen rallied for the second day to reach a fresh weekly high of 150.61, and triggered the sell entry I had at 149.68, the 10-Day SMA. The 200+pip rally overnight almost took out the stop I set at 150.87, the 9/4 low however, as market participants speculate the Bank of England to expand its asset purchase program to GBP 225B from GBP175B at its rate decision tomorrow, the pair may retrace the advance from the previous month as policy makers take additional steps to stimulate the ailing economy. As a result, I will maintain the short position and will keep the target at 146.31, the 9/24 low but nevertheless, I may look to tighten the stop to breakeven if the pound-yen slips back below the 10-Day SMA during the U.S. trade.

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We like the idea of attempting to establish a long position on the cross should the market be able to recover off of the sub-1.6300 Wednesday lows. The weekly chart is very compelling and shows the market in the process of potentially carving out a major base. A bullish hammer close two-weeks back was followed by a strong bullish reversal candle in the previous week, which has ended a sequence of consecutive weekly lower highs. If the market can manage a recovery into the US session back above 1.6300, we will look to buy a  break back above 1.6350. STRATEGY: BUY @1.6355 FOR AN OPEN OBJECTIVE; STOP 1.6240. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY. POSITION SIZE WILL EQUAL 3X EQUITY.    

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