USD/JPY’s Quiets Ahead of FOMC Minutes Providing Scalping Opportunity

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/scalping_report/2011/01/04/USDJPYs_Quiets_Ahead_of_FOMC_Minutes_Providing_Scalping_Opportunity.html

The USD/JPY has been tracking higher on an improved outlook for the U.S. economy which was further supported by an unexpected 0.7% increase in November factory orders. However, we have seen conviction wane with the FOMC minutes ahead and Non-farm payroll numbers due out at the end of the week. The pair has maintained a high correlation with U.S> yields and should remain quiet ahead of the monetary authority release at approximately 19:00 GMT.

Key Technical Levels

Charts created using Strategy Trader– Prepared by John Rivera

The USD/JPY is testing the 38.2% Fibo of its recent decline at 82.27 which is helping stall price action as markets debate short-term direction. Meanwhile, an intra-day range between 82.05 and 82.25 is providing target levels for traders to enter and exit positions. A break of the lower bound increases downside risks to 81.60, a bullish break exposes 82.74

Charts created using Strategy Trader– Prepared by John Rivera

Key Support/ResistanceLevels to Watch

Pair	S/R	Level	Spot	Valid Since	Market Influence
CAD/JPY	Resistance	20-Day SMA	82.50	12/20/10	Low
EUR/USD	Resistance	50-Day SMA	1.3452	11/15/10	Medium
AUD/USD	Support	20-Day SMA	1.0001	12/03/10	Low

Quantitative Metrics

An ATR of 66 pips makes the USD/JPY an attractive scalping target as the low daily range limits potential losses. The pair’s volatility ranks at the bottom of the most traded pairs on an absolute and relative basis with it only accounting for 81% of the spot price. However, a widening Bollinger band is a red flag as one price action increases overall risks. The pair’s level of variance is on the rise but still ranks in the bottom half of the majors, reducing concerns for high frequency traders. A rise in implied volatility readings should be a concern for traders especially with the amount of event risk on tap for the week.

Charts created using Strategy Trader– Prepared by John Rivera

Volatility / Activity Indicators

	EURUSD	GBPUSD	USDJPY	USDCHF	USDCAD	AUDUSD	NZDUSD	GBPJPY	EURJPY
ATR(14)	0.0132	0.0148	0.6650	0.0112	0.0072	0.0089	0.0087	1.2056	1.0094
ATR%	0.99%	0.95%	0.81%	1.18%	0.72%	0.88%	1.13%	0.94%	0.92%
20-5 Day SMA	-0.0093	0.0054	1.4435	0.0214	0.0089	-0.0170	-0.0191	2.6993	1.1783
Boll. Band Width	0.0400	0.0631	3.8348	0.0642	0.0259	0.0514	0.0493	9.3921	5.1129
1 wk Implied Vol	12.8150	9.6900	10.4100	12.5875	8.9150	12.9400	13.4050	10.3500	11.3650

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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com

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