There is nothing is happening with USD/JPY. For the past few weeks, weaker than expected statistics in the U.S. continue to be shrugged off due to a crippling winter. This small hiccup in the U.S. recovery however should not change Fed policy. When comparing the U.S. to the rest of the world, the outlook is still upbeat.
Today’s U.S. New Home Sales release surprised many as February purchases climbed to 468K vs an eyed 400k, with a positive revision to 427k for the prior month. The news provided a jolt for USD/JPY from 102.10 to 102.30. The move brought the pair off the lows of the sessions, but still trapped in the middle of the February range.
The daily chart of USD/JPY displays the bullish Gartley that was confirmed at 100.72. This price level will remain critical support and should only be breached if we see a major risk-off event. The bullish stabilization that has taken place in the month of February is limited but very poised to see one key thrust higher. Price has steadily made higher highs and higher lows despite trading in a very tight range.
The medium and long-term outlooks for USDJPY remain bullish but probably will occur in a very choppy manner. Key upside targets include the 103.70 level which could also provide a bearish Gartley pattern.
The trade: Buy USD/JPY at 102.30 with a stop loss at 101.70 and a take profit at 103.50. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading