Daily 62% Fibonacci Support In View For USD/JPY

With about 24-hours to go until the first Fed Announcements of 2021, the markets are largely neutral. The action is modest on Wall Street, with the DJIA DOW (+44), S&P 500 SPX (+3), and NASDAQ (+19) hovering near flat. Safe-havens are also seeing limited action, led by slight pullbacks in GOLD, the USD/CHF, and USD/JPY. For the USD/JPY, the negative price action has brought a key Fibonacci support level into view.

This morning brought a collection of diverse economic metrics. Here’s a quick look at the highlights:

Event                                                                       Actual                  Projected          Previous

House Price Index (YoY, Nov.)                               11.0%                       NA                    10.2%

S&P/Case-Shiller Home Price (YoY, Nov.)             9.1%                        8.6%                  8.0%

Richmond Manufacturing Index (Jan.)                    14                            NA                     19

Although they are peripheral in nature, today’s data set brought some good news for U.S. real estate. Prices are up year-over-year, suggesting that demand remains robust. On the manufacturing front, things aren’t looking as good. The Richmond Manufacturing Index showed a major downturn to begin 2021. This number mirrors the Dallas Fed Manufacturing Index report from yesterday.

One other story worthy of note is the release of the IMF World Economic Outlook for 2021. As expected, COVID-19 plays a huge role in this year’s IMF forecasts. Here are few key points of the report:

• 2021 global economic growth is expected to come in at 5.5%
• COVID-19 vaccines will be a major contributor to growth
• US economy is to expand by 5.1% for 2021
• China’s economy is to post 8.1% growth for 2021
• India’s economy is to expand by 11.5% for 2021

Once again, it looks like China is going to be the big COVID-19 winner. Now, let’s take a look at that Fibonacci support level for the USD/JPY.

Fibonacci Support In View For The USD/JPY

At press time, the USD/JPY is in a holding pattern just above the 103.50 handle. Prices are in a non-committal technical area on the daily chart with the Fed Announcements scheduled for tomorrow.

Bottom Line: If we see a bearish move on Wednesday’s Fed Announcements, the 62% Fibonacci retracement may come into play. Until elected, I’ll have buy orders in the queue from 103.31. With an initial stop loss at 102.94, this trade produces 30 pips on a sub-1:1 risk vs reward ratio.