USD/JPY continues ascent after recapturing 50-day SMA

The dollar/yen (USD/JPY) extended its bullish rebound after Greece was able to reach a new agreement with its creditors.  Market investors can now focus on whether or not the Federal Reserve will raise rates at its September meeting.  Last week Janet Yellen said, “I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy.” 

Now that it appears we are not going to have a financial market meltdown from Greece or China, continued US economic growth could help USD/JPY regain its longer-term bullish trend. 

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The USD/JPY daily chart shows that price formed a bullish Gartley pattern last week.  The bullish reversal pattern confirmed point D with the 78.6% Fibonacci retracement level of the X to A leg and the 200.0% Fibonacci expansion level of the B to C rally.  Yesterday price closed strongly above both the 200-day SMA and downward sloping resistance trendline.  The next key resistance area will come from the 124.50 zone. 

If we see profit taking or risk aversion hit this currency pair, key support will come from the 100-day SMA, which is currently trading around the 121.18 level.  

The trade: Buy USD/JPY 123.20, with a stop loss at 122.20 and take profit at 125.20.  The risk/reward ratio is 1:2

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Edward J. Moya

Senior Market Strategist

WorldWideMarkets Online Trading