USDJPY Scalp Bias Reverses on Sunday Gap- Levels Ahead of FOMC

2013-09-16 21:52:00

Michael Boutros, Strategist

Talking Points

USDJPY correction gaps into support ahead of FOMC
Scalp bias shifts to the long side above 98.42
Updated scalp targets and key thresholds heading into this week’s major event risk

USDJPY Daily Chart

Forex_USDJPY_Scalp_Bias_Reverses_on_Sunday_Gap-_Levels_Ahead_of_FOMC_body_USDJPY_Daily.png, USDJPY Scalp Bias Reverses on Sunday Gap- Levels Ahead of FOMC

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

USDJPY gaps lower on the Sunday open into interim Fib support 98.75
Maintains ascending channel formation dating back to August lows
September open still intact at 98.42- Scalp Bias Bullish above this mark
Topside objectives at 99.84/92, 100.58, 100.97 and 101.59.
Break below 98.27 (September opening-range low) Scalp Bias Neutral
Key support range 97.65/73- Bullish Invalidation
Support Break targets primary objective range 96.55 - 96.74
Secondary support ranges 95.37 – 95.43
Daily RSI 50 hold would be supportive- 60-Breach to offer conviction on long bias
Key Events Ahead: FOMC on Wednesday

USDJPY Scalp Chart

Forex_USDJPY_Scalp_Bias_Reverses_on_Sunday_Gap-_Levels_Ahead_of_FOMC_body_USDJPY-_Scalp.png, USDJPY Scalp Bias Reverses on Sunday Gap- Levels Ahead of FOMC

Scalp Notes: Last week we outlined our broader USDJPY setup with our near-term focus shifted to the downside after achieving a clean tag of the 61.8% Fibonacci extension taken from the late-June advance at 100.58. We noted that with, “daily RSI now failing as second attempt at breaching the 60-threshold caution is warranted, with an impending trendline support break in the oscillator suggesting a near-term correction lower may be in the making. Bottom line: we may get a short-term correction but remaining constructive above 98.56/75 with only a break (and close) below 97.65/73 (three way Fib confluence) invalidating our broader bullish outlook.”

The Sunday-gap open has immediately shifted our focus higher with the break back above the 98.56/75 range putting long scalps back into play. Note that we continue to trade sub-trendline resistance dating back to the monthly high with a breach above offering further conviction on our near-term directional bias. We’ll lighten the lot sizes as we head into Wednesday’s FOMC policy meeting where we’ll get the updated quarterly projections from the committee as they pertain to growth, inflation, and interest rates. Note that this event represents significant event risk and will likely fuel a surge in volatility.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Key Threshold Grid

Entry/Exit Targets	Timeframe	Level	Significance
Resistance Target 1	30min	99.27 – 99.33	38.2% % 61.8% retraces / 100% Fib Ext
Bearish Invalidation	30min	99.50/55	Soft Res / Pivot / opening-range high
Break Target 1	30min	99.78	61.8% Retracements
Break Target 2	30min	100.14	78.6% Retracements
Break Target 3	Daily / 30min	100.58	61.8% Fib Ext / Monthly High
Break Target 4	30min	100.87	88.6% Retracement
Break Target 3	Daily / 30min	101.52/59	78.6% Retrace / July High

Support Target 1	30min	98.95/98	61.8% Ext / 23.6% Retrace
Bullish Invalidation	Daily / 30min	98.56 – 98.66	38.2% & 50% Retracements
Break Target 1	30min	98.37	100% Fibonacci Ext
Break Target 2	30min	98.00	Big Figure / Soft Support / Pivot
Break Target 3	Daily / 30min	97.65 – 97.72	61.8% & 50% Retrace / 38.2% Fib Ext
Break Target 4	30min	97.38	1.618% Fibonacci Ext
Break Target 5	Daily / 30min	96.73 – 96.82	61.8% & 78.6% Retracements

Average True Range	Daily	91	Profit Targets 22-24pips