USD/JPY extended its bullish rebound after the ADP National Report announced that private sector employment increased by 237,000 jobs from May to June. The reaction took the currency pair to a session high of 123.14, before settling back down closer to the 123.00 handle. Employment increased 120,000 for payrolls for businesses with 49 or fewer employees. Medium businesses gained 86,000 employees and large business climbed by 32,000.
Tomorrow, the Non-Farm Payroll report will be released because of the July 4th holiday that will have markets closed on Friday. If we continue to see solid US job growth, this could help USD/JPY regain its longer-term bullish trend.
In the short-term, dollar-yen remains vulnerable to any risk off event from Greece. If we do see risk aversion dominate the financial markets, key support may come from 120.50 region. The USD/JPY 4-hour chart shows that if we do 200-pd SMA respected here and price drops 121.30, a bullish butterfly pattern may form. If the downward slide continues, major support will come from a potential bullish Gartley pattern at the 120.50 level.
If we do not see any downward price action and price captures the 123.50 level, further upside could target the 124.20 level.
The trade: Buy USD/JPY 121.20, with a stop loss at 120.45 and take profit at 123.45. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading