The U.S. stock market is off and running for the week, with the leading indices trading very near all-time highs. At the midway point of the session, the DJIA DOW (+127), S&P 500 SPX (+15), and NASDAQ (+67) are deep into the green. Sentiment is bullish even though it appears that Biden’s first COVID-19 stimulus package will be delayed.

This morning’s U.S. economic calendar is vacant. Aside from the weekly Treasuries auctions, the only item out is the Consumer Inflation Expectations (Jan.) report. Expectations came in at 3.05%, up from 3.00% in December. Given the uptick in oil prices, Fed QE, and pending stimulus, this figure is poised to grow as 2021 unfolds.

For the time being, it appears that $1400 direct stimulus payments are on the way to U.S. citizens. However, the timeline for the payments will likely be several weeks. For the immediate future, Congress is going to move forward with the second Trump impeachment hearing. While the trial isn’t likely to produce a conviction, it will push back the enactment of the $1.9 trillion COVID-19 stimulus package.

Despite the delay, U.S. stocks are on the march north. Accordingly, we are seeing a pullback and potential buying opportunity in the USD/JPY.

Stocks Up, USD/JPY Down

The past two days have featured bearish conditions in the USD/JPY. Rates are off 70+ pips from yearly highs and falling.

Here are the key levels to watch for the immediate future:

• Resistance(1): Spike High, 105.76
• Support(1): 38% Current Wave, 104.82

Bottom Line: If rates continue downward, I’ll be looking to buy the USD/JPY from the 38% Fibonacci retracement. As long as the Spike High (105.76) is the top of this market, I’ll have buy orders in the queue from 104.87. With an initial stop loss at 104.62, this trade yields 25 pips on a standard 1:1 risk vs reward ratio.