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Talking Points:
- USD/JPY Technical Strategy: Flat
- Support: 100.86 (61.8% Fib exp.), 100.17 (76.4% Fib exp.)
- Resistance:101.41 (50% Fib exp., trend line), 101.96 (38.2% Fib exp.)
The Japanese Yen launched a swift recovery against the US Dollar expected after prices traced out a bearish Evening Star candlestick pattern. More of the same seems likely ahead after the pair cleared support at 101.41, marked by the intersection of a rising trend line set from early February and the 50% Fibonacci expansion. Sellers now aim for the 61.8% level at 100.86, with a break below that eyeing the 76.4% Fib at 100.17. Alternatively, a move back above 101.41 sees the next level of resistance at 101.96, the 38.2% retracement.
Entering short at this point seems unattractive from a tactical perspective. The trading range between relevant support and resistance is 55 pips, whereas 20-day ATR is at 69 pips. That creates the risk of an adverse skew in risk/reward parameters when using a stop-loss triggered on a daily closing basis (as is the case with our strategy). We will opt to stand side for now.
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Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for DailyFX.com