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USD/JPY Tightens In Value Area 109.25-.50

Since last week’s run to safe-havens, the USD/JPY has exhibited tight daily ranges near the 109.50 to 109.25 area. Price action has become compressed due to moderate two-way action. Without any market movers scheduled for today’s U.S. forex session, the USD/JPY will very likely stay in consolidation until the overnight hours.

During today’s U.S. pre-market hours, several secondary economic metrics came across the newswires. One worthy of note was the MBA Mortgage Applications (May 20). This figure fell dramatically, coming in at -3.3%, well under the previous release of 2.4%. While not a primary market mover, the slumping MBA Mortgage Applications report does suggest that there may be trouble on the horizon for the U.S real estate market.

USD/JPY Enters Consolidation

It is not uncommon for currency pairs to post significant directional moves and then seek an area of fair value via consolidation. The USD/JPY is doing exactly that, forming a pronounced “L” pattern on the daily chart.

USD/JPY, Daily Chart
USD/JPY, Daily Chart

Here are two levels to watch going into the Thursday session:

  • Resistance(1): Daily SMA, 109.70
  • Support(1): May Low, 109.02

Bottom Line: Until elected, I will have buy orders queued up from just above May’s low at 109.09. With an initial stop at 108.84, this trade produces 25 pips on a standard 1:1 risk vs reward management plan.

If you are actively trading the USD/JPY, be aware that Japan’s Foreign Bond Investment (May 24) and U.S. Q1 GDP are due out in the next 24 hours. Anything is possible going into each of these economic events, so use caution when assigning leverage to your trades.  

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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