It looks like the current policy stance-particularly from New Zealand and Australia, political uncertainty and rising inflation in major economies are triggering the Greenback’s sell off. Looking at the USDJPY keenly, the USD managed to claw back its strength last week but beginning of this week, the JPY has since asserted its control and right now prices are trading around the 50-61.8% Fibonacci level from last year’s high-Low. This should be in line with Trump’s administration for a weaker USD which in turn they say shall spur manufacturing and support jobs as a result. We already saw this improvement in today’s Factory orders, Trade Balance and Durable Goods which turned out positive. They were not market moving but at least some bullish momentum were injected into this pair after Monday’s ISM Manufacturing activity ticked lower and discouraged USD investors from jumping into the bullish bandwagon.
In the weekly chart, it is obvious that last year bearish with the Yen mauling the USD in the first half of the year. The USD managed to rally and closed the year close to its open. However in the second half of the year, the USD was rallying and this momentum reduced as the New Year opened. As observed, there is a clear reduction in USD longs and momentum waned as indicated by OBV and Stochastics. Right now, and of note last week, price action is hinting a USD rally though it is not 100%. If price action dip lower than 108.50 and a buy signal is printed by the stochastics that will be a perfect buying opportunity. I will like to enter long in the 4HR chart and target this week’s high of 112. The reason for this is the buy signal which has been printed and the candlestick behavior in relation to the lower BB in this time frame. You will also note the reversal occurring at 23.6%.
Trade as follows:
Stop Loss: 109.90
Take Profit: 112.00 and 113.50
Today we watch out for Crude Oil inventories, ISM Non-Manufacturing Activity data and ADP Non Farm Payrolls all in the NY Sessions. Remember, the general market concession is for soft Labor data partly caused by the horrible weather. But, remember, contrarian theory might really work out here and the market surprised by robust labor data. Watch out for these data as we gear up for Friday.
Have a good trading day.