The USD/JPY has completely fallen out of bed today, down over 100 pips. Headlines out of China and the future of U.S. Treasuries are cited as being the drivers of the move. At this point, the bears are in full control of this market.

Several economic reports are scheduled to be released out of Japan in the coming hours. The Foreign Reserves statistics and Leading Economic Index (Nov.) have the potential to shake up USD/JPY pricing during the U.S. overnight session.

USD/JPY Technicals

One look at the daily chart illustrates the magnitude of the current intrasession downtrend. As of this writing, price is settling near December’s low of 111.40.

The USD/JPY has posted a daily low of 111.27, trading briefly beneath December’s bottom before retracing. This occurrence is not a crucial indicator of market conditions, but does show that there are buyers present at downside support levels.

Below are several macro support levels that may attract participation to the bull:

• Support(1): December Low, 111.40
• Support(2): 50% Retracement Sept. Low/Nov. High, 111.02
• Support(3): 62% Retracement Sept. Low/Nov. High, 110.14

Overview: In such a heavy short-term downtrend, I am skeptical about taking a position long. However, the proximity of the 50% macro support level to the round number of 111.00 is very attractive. If we see selling resume in the coming hours a long entry will be warranted.

Buys from 111.06 with an initial stop at 110.74 will give a good opportunity to take 25 pips from the market. Although this trade is not a true 1:1 R/R scenario, the conservative profit target is due to the recent strength of bearish sentiment.