Today has been anything but exciting in the currency markets, but U.S. Indices have put on a show. Currently, the DJIA is up 200 points and S&P 500 has posted a remarkable day. Optimism following the House of Representatives' passage of President Trump’s tax reform plan is certainly evident in today’s trade.

A bit earlier, I issued a report on the S&P 500 and a trading plan for getting in on the bullish action. Price has not pulled back at all, with only a few pauses evidenced by compression on the 30-minute chart. The trade recommendation stands until the close today, perhaps a late pullback will produce a few green ticks.

USD/JPY Technical Outlook

Wednesday’s session was a beauty for USD/JPY bears, as price fell out of bed below several key support levels.

USD/JPY, Daily Chart

The Thursday session has brought a retracement of this action and subsequent failure, with the Bollinger Midpoint proving to be valid resistance. Here are the key levels for the remainder of the U.S. trading day:

• Resistance(1): Bollinger MP, 113.30

• Resistance(2): 38% Current Wave, 113.34

• Resistance(3): Daily SMA, 113.65

• Support(1): Wednesday’s low, 112.48

• Support(2): Psyche level, 112.00

• Support(3): October low, 111.65

Bottom Line: The extreme sell off below support on Wednesday is a signal of shifting market sentiment. With the presence of a Bollinger MP/Daily SMA crossover, and price failing at the 38% Fibonacci level of the current selloff, I expect the USD/JPY to grind lower as we near the end of the week.

Shorts from 113.24 with an initial stop above Wednesday’s high of 113.49 is a solid way to capitalize on bearish action. A 1:1 or 1:2 R/R is ideal here. If sellers enter the market in force from this level, price is poised to test the lower Bollinger Band and the 112.25-112.00 area.