Day three: potential USD/JPY trade

The move to 102.50 (double-bottom target) played out nicely, although my profit target seems a touch conservative, with the pair hitting 103.09.

Source: Bloomberg

Following on from my potential trade idea yesterday, it netted 66 pips, which would be considered a fairly aggressive move last week.

USD/JPY has failed to close above the strong horizontal resistance seen between 102.79  and 102.82, but as you can see from the various oscillators, they highlight a strengthening trend.  We’ve also seen a nice break of the downtrend drawn from the January high and a move to the April 3 high of 104.11 can’t be ruled out in coming weeks.

This is where things become interesting as this is also the double-bottom neckline (printed in February and May) and a closing break here would target the 107 area.

Two-year US treasury yields are moving aggressively higher and this is putting good upside in the USD. The dollar index is now up 13 of the last 15 trading sessions and feeds into my long-held view that the USD is the place to be for 2014 and 2015. Of course we need to see USTs continue to move higher to increase valuation support and this is clearly materialising in the front-end of the curve.

AUD/USD has also moved aggressively lower, hitting 0.9303; however buyers have moved back into the pair. I am not 100% convinced by the move lower, and as a result I remain neutral on the pair at current levels. Australian building approvals are released at 11:30 AEST, although I am sceptical this data point causes a big reaction.

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