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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 US Dollar turned lower against the Japanese Yen as expected but a Piercing Line candlestick pattern at rising trend line support set from early February hints a turn in the opposite direction may be ahead. Near-term resistance is at 102.84, the 23.6% Fibonacci expansion. A break above this barrier exposes the March 7 high at 103.75 and the 38.2% level at 104.14. Trend line support is now at 101.35.
A compelling argument for a long position can be made from a risk/reward perspective. We will opt to stand aside on tactical considerations however. Prices are showing a formidable 0.75 correlation with the US 10-year US Treasury yield (on 20-day percent-change studies). This hints at high sensitivity to US monetary policy expectations and hints the outcome of this week’s FOMC policy announcement may turn out to be a major inflection. With that in mind, we will stand aside and allow event risk to pass before committing to a position.
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Daily Chart – Created Using FXCM Marketscope 2.0
— Written by Ilya Spivak, Currency Strategist for DailyFX.com