The month of February has been terrible for USD/JPY. The pair has fallen for 9 consecutive days and yesterday’s fall prompted the BOJ to intervene in the FX markets for the first time in four years. The downtrend with the dollar has stemmed from both the safe-haven flows to the yen and the belief that the Federal Reserve will not raise rates in 2016.
The USD/JPY 60-minute chart shows that key support remains just ahead the 110.90 level. Following the 200 pip intervention pop, the pair did pullback 116.69, but has since stabilized above the 112.00 handle. If we continue to see price firm up here, price may target the 114.30 zone. It is around that area that we could see the formation of a bearish Gartley pattern. Point D is targeted with the 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.
If we continue to see selling pressure, major support may come from the 110.00 handle. Deeper support may come from the 108.50 region.
The trade: Buy USD/JPY 112.00, with a stop loss at 111.50 and take profit at 114.00. The risk/reward ratio is 1:4