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Today’s Trading Edge: USD/JPY sinks after Kuroda calls a top

 

WWM USDJPY JUNE 10 2015

USD/JPY plummeted over 1.3% after Bank of Japan Head Kuroda said the yen was “very weak” and that he did not expect the currency to fall further.  The comments drove the currency pair to a two-week low.  The reversal came as a surprise to many especially since on Friday, dollar-yen skyrocketed over a 100 pips to 125.84, following an incredible Non-Farm Payroll Report. 

In my last post, I highlighted that the USD/JPY breakout is tentatively finding resistance from the 161.8% Fibonacci expansion level of the 2014 December high to low leg.  Price has respected that level and has dropped off significantly following Kuroda’s comments.

The USD/JPY daily chart displays a bearish butterfly pattern that signaled a key reversal that is tentatively finding support from the 122.00 handle.  While the currency pair was long overdue for a correction, this pullback may be short-lived.  If we see the noted support level breached, downside momentum may target the 50-day SMA.  It is around the 120.82 area that we may look to see price stabilize.      

The trade: Buy USD/JPY 120.82, with a stop loss at 120.32 and take profit at 122.82.  The risk/reward ratio is around 1:4

Edward J. Moya

Senior Market Strategist

WorldWideMarkets Online Trading 

Forex Trading Demo
 


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