Today’s Trading Edge: USD/JPY – Continues Deep Pullback to a four-week low

WWM USDJPY DEC 16 2014

USD/JPY has continued to pull back sharply on risk aversion that was triggered by immense volatility from the collapsing Russian ruble.  If Russia is the key risk event that drives fear into the global economy, this pullback may continue.

The USD/JPY daily chart shows that price is tentatively respecting 116.88, which is the 23.6% Fibonacci retracement of the summer rally.  Any further downside momentum on a continued pullback should target the 38.2% Fibonacci retracement level at 113.81.

Prior to the current dip, the bullish trend had not much difficulty breaking above the 120 barrier level and overextended its move all the way to 121.84.  Despite today’s violent price action, buying on major drops that respect key Fibonacci levels may provide optimal entry levels for returning bullish bets.

The trade: Buy USD/JPY at 117.10 with a stop loss at 116.60 and a take profit at 119.10. The Risk/Reward Ratio is 1:4

Edward J. Moya

Technical Strategist

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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