The USD is having a solid open to the trading week. Led by gains against the Euro, Swiss franc, and Japanese yen, the Greenback is riding a wave of optimism. Today’s bullish sentiment is a result of the U.S. Core Personal Consumption number coming in right on schedule at 1.9%.

Consumer spending is up, U.S. GDP is growing, and the FED appears poised to continue its plan of “gradual tightening.” Early week strength by the USD may bring a key level into play for the USD/JPY. Let’s dig into the technicals and check out a trade or two.

USD/JPY Technical Outlook

Last Thursday and Friday had the USD/JPY posting a moderate retracement of the recent bull run. Today’s action has been a continuation of the prevailing trend.

There are two levels on my radar for the near future:

• Resistance(1): 62% Retracement Jan. High/ March Low, 110.03
• Support(1): 38% Retracement Current Wave, 108.52

For the USD/JPY, several factors contribute to a bullish bias. First, price failed to penetrate the 38% retracement at 108.52. Secondly, price is extending to the bull on longer time frames, specifically the monthly and weekly charts.

Add it all up — the USD/JPY is on a collision course with the 110.00 handle.

Bottom Line: As the week unfolds, I will be looking for the recent uptrend to slow down dramatically between 109.75 and 110.50. Sells from 109.94 with an initial stop at 110.26 produce 30+ pips using a 1:1 risk vs reward management plan.

A possible short position trade may set up between 109.75 and 110.50 later in the week. If this scenario plays out, be on the watch for a Live Market Update breaking down the action.