Today has brought tight forex trading conditions across the majors, especially to the USD/JPY and other safe-havens. For the session, the dollar/yen has posted a modest 34 pip range. This pair has made several attempts at cracking 106.00, but appears content to settle somewhere beneath this key psyche level. If bidders step up to the plate during the late session, rates may test an important daily moving average.

While things are relatively quiet now, tomorrow brings the release of U.S. Q2 GDP. Analysts are projecting the annualized figure to come in around 2.0%, down from the Q1 mark of 2.1%. Barring a major surprise, GDP will remain below 3.0%, thereby strengthening the case for further FOMC easing.

USD/JPY In Rotation Beneath 106.00

At press time (2:00 PM EST), the USD/JPY is in a consolidation phase just beneath the 106.00 level. This area is slightly below the Daily SMA, which currently sits at 106.07.

Here are the key areas to watch going into Thursday’s U.S. GDP Report:

• Resistance(1): Daily SMA, 106.07
• Resistance(2): Bollinger MP, 106.64
• Support(1): Swing Low, 104.45

Bottom Line: For the remainder of the session, I will have sell orders queued up in the USD/JPY from 106.04. With an initial stop at 106.16, this short-term scalp produces 8-12 pips on a rejection of the Daily SMA.

The coming U.S. overnight session features release of Japan’s Foreign Bond Investment (August 23) report and a speech from the BoJ’s Hitoshi Suzuki. If you are trading the yen, be aware of these two events as they will certainly be reflected in USD/JPY pricing.