Following on from my potential trade idea yesterday, I continue to wait for a break of 0.9321 before looking more favourably at short positions.
I actually like buying USD/JPY around current levels (spot now at 101.84), although this is more a reflection of the technical set-up. Looking at the daily chart, we have seen the pair close above the April downtrend, as well as the neckline of the double-bottom printed during July. The technical target of the double-bottom (chart below) is 102.50, so I would look for this as a potential profit target, with a potential stop loss at 101.55 (just below the 38.2% retracement of the recent rally from 101.09).
With a raft of key US data (2Q GDP, FOMC meeting, employee cost index and payrolls) in play this week, it’s interesting to see a slight move higher in short-term treasuries. This is supporting the USD and throwing weight behind the trade.