USD/JPY Technical Analysis: Passing on Long Trade Setup
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- USD/JPY Technical Strategy: Flat
- Support: 107.31, 106.50, 105.18
- Resistance: 108.63, 110.08, 110.76
The US Dollar moved higher against the Japanese Yen as expected after prices put in a bullish Morning Star candlestick pattern. A daily close above the 108.40-63 area marked by the October 2 close and the 38.2% Fibonacci retracement exposes the 109.70-110.08 zone (50% level, October 1 high). Alternatively, a reversal back below the 23.6% Fib at 107.31 opens the door for a test of the 14.6% expansion at 106.50.
While a pullback over the past two sessions has augmented positioning such that a long position is now acceptable from a risk/reward perspective, we will tactically opt to stand aside. A strong correlation between USDJPY and the 2-year US Treasury yield (0.75 on 20-day percent change studies) hints it prudent to wait for the passing of the FOMC policy announcement later in the week before committing to a trade highly sensitive to what Chair Yellen and company may unveil.
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Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com