Down But Not Out

Yesterday's rally in the US equity market failed to lift the USD/JPY pair higher, or anything against the JPY as a matter of fact. This was surprising to me, as I'm sure it was for many others. Usually the JPY, like the USD, declines when the markets rally, as a sign of risk appetite in the marketplace flocking to higher-yielding assets and away from low-yielders (JPY) and safe havens (USD).

The USD/JPY chart showed a nice reversal pattern last week, yet has not gone higher since, however, it has not broken the support level either. For now, my trade from last week is down but not out. There isn't much in the way of economic data this week to get help from the fundamentalists, so I'll have to rely on basic market trends and momentum to lift my trade into profitability.

Getting In Ahead of the Game

Yesterday's GDP data came in better than expected, showing that although the greatest economy on Earth is still contracting, it's doing so at a slower rate:

GMT 12:30 PM USD Gross Domestic Product (Annualized) (2Q F)

-0.7% (actual) -1.2% (expected) -1.0% (previous month)

This morning's jobless claims numbers was basically a wash, coming in as expected, however, pending home sales for the month blew expectations out of the water:

GMT 14:00 PM USD Pending Home Sales (MoM) (AUG)
6.4% (actual) 1.0% (expected) 3.2% (previous month)

Tomorrow is the all-important NFP and Unemployment Rate figures, probably the single biggest market-moving data of the month. There are modest expectations going into tomorrow, so the stage is set for a potential nice surprise.

The USD/JPY showed a reversal bar off the daily chart this past Monday (highlighted in the chart shown). This is a good level to get in, ahead of the NFP report tomorrow, in anticipation of a potential reversal. Support lies at the 88 level, making for approximately a 150 pip risk trade. If the reversal takes place, USD/JPY can easily go up to the 92-93.50 level, creating a very favorable risk/reward bet.

Charms and USD/JPY Opportunities

My wife and I just finished feeding our twin sons. The level 3 nipple is still working like a charm, especially at night-time, as there's less spillage at night than in the day. The boys are already fast asleep in their crib (they are still sharing a crib). let's hope it stays that way for at least the next 6 hours...

Now that I'm up, I took a look at the market and see a nice little opportunity to get into the USD/JPY. It's trading near some hourly support, which is around the 90.80 level, which isn't far from the daily support at around the 90.20 level. I'm going long a few lots around here as I think this presents a favorable risk/reward situation. With the recent favorable economic data coming out of the U.S., and the CPI and Industrial Production coming out in the morning, there should be plenty of volume to move the market.