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Today’s Trading Edge: USD/JPY – Dollar falls after the worst ISM Manufacturing reading since mid-2009


The U.S. dollar bullish trend took a break today asU.S. yields declined after the November ISM Manufacturing report.  The manufacturing reading came in at the lowest level since mid-2009 and the first below 50 print since May 2013. The ISM Manufacturing headline number printed a 48.6 reading, well below the 50.5 forecast. New orders call came weaker at 48.9 verse an eyed 52.9 reading and the lowest level since August 2012.

The USD/JPY daily chart shows the recent range bound trading that has been in place for most of 2015. Price formed a bearish butterfly pattern at beginning of summer with the 125.84 high, but then formed a bullish butterfly pattern on August 24th. The bullish reversal pattern has remained intact but currently faces major resistance from the 124.00 handle.

If we continue to see weakness here, price could form a bullish Gartley pattern around the 122.48 level. On the 60-minute chart, point D is targeted with the 78.6% Fibonacci retracement of the X to A leg and the 127.2% Fibonacci expansion level of the B to C leg. If valid, we could see price make an attempt to take out the noted 124.00 resistance level.

If bullish momentum fails to return, we could see price find support around the 121.50 zone.  

The trade: Buy USD/JPY 122.50, with a stop loss at 121.50 and take profit at 124.50.  The risk/reward ratio is 1:2

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