USD/JPY Technical Analysis: Passing on Long Trade Setup

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Talking Points:

• USD/JPY Technical Strategy: Flat
• Support: 117.91, 115.48, 113.51
• Resistance: 120.82, 121.91, 123.88

The US Dollar advanced against the Japanese Yen as expected after putting in a Bullish Engulfing candlestick pattern. A daily close above the December 23 high at 120.82 exposes the 38.2% Fibonacci expansion at 121.91. Alternatively, a turn below the 23.6% Fib retracement at 117.91 clears the way for a challenge of the 38.2% threshold at 115.48.

While entering long seems compelling from a purely technical perspective, we will tactically opt to stand aside. The possibility of a surprise outcome on the upcoming ECB monetary policy announcement represents significant risk aversion risk ahead. Haven flows are likely to boost the Yen in such a scenario, overturning bullish chart positioning. With that in mind, we will remain flat.

NOTE: FXCM Inc, Parent Company of DailyFX, will raise margin requirements given volatility risk

Daily Chart - Created Using FXCM Marketscope

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com