Mixed Japanese Data Spark USDJPY Correction – Sept 30, 2014

Mixed Japanese Data Spark USDJPY Correction - Sept 30, 2014

Mixed Japanese Data Spark USDJPY Correction - Sept 30, 2014

Recent data from Japan sparked a short-term USDJPY correction in today’s Asian session, as price appears to have pulled back to the 38.2% Fibonacci retracement level on the 1-hour forex time frame.

A deeper USDJPY correction could last until the 61.8% Fib level, which is near the 109.00 major psychological handle and the simple moving averages. The 100 SMA is still moving above the 200 SMA for now, indicating that the uptrend is still valid.

USDJPY Correction Levels

Stochastic is moving down though, reflecting a pickup in short-term selling momentum. MACD is on middle ground but is also moving down, confirming that bears might be in control of price action for now.

A break below the 109.00 handle could indicate that a longer-term correction might take place, possibly until the 108.50 minor psychological support zone. Going long at 109.00 with a stop at 108.50 and a target of new highs at 110.00 could yield a simple 2:1 return-on-risk for a short-term trade.

Earlier today, Japan release weak household spending and industrial production data. However, jobs data and the retail sales report both came in stronger than expected and gave the Japanese currency a bit of a boost. Later on, US Chicago PMI and CB consumer confidence are up for release, both of which might also have a say in USDJPY price action.

The bigger market-mover for the USDJPY pair might be the upcoming US NFP release on Friday, which could show a pickup in hiring for the month of September. If so, this could renew expectations of Fed tightening for early next year and give the dollar another leg higher. Many are expecting to see a test of 110.00 within the week, although profit-taking might also prevent the rally from being extended.

On the other hand, weak NFP data could inspire the much awaited dollar correction, allowing traders to hop in a long USDJPY trade at much better prices.

To contact the reporter of the story: Samuel Rae at samuel@foreminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.