The US dollar holds steady, potential for an upside test
After a brief pause we are back with another strategy session and the pair we have picked is the USD/JPY. We have keenly awaited today's testimony by Janet Yellen to know more about the views of the FED under her new leadership. What we got was more of the same and that was enough to attract some US dollar bulls.
The chart says it all as after a brief period of hesitation following the release of prepared remarks the US dollar has been sold against the Japanese Yen. That marked a low around 102.15 and subsequently has resulted in a rally to test the daily highs around 102.65-70 area.
After the test has failed the USD/JPY binary options forex pair has subsided and is currently trading in a tight range between 102.60 and 102.70. We are keenly awaiting the Asian session for some fresh impetus.
Meanwhile the main trigger that will surely present new opportunities is the Retail Sales report on Thursday. However we have a full day ahead tomorrow so it will be interesting to see how the pair reacts to a sustained hourly close above 102.80.
In our view this will be a good opportunity to buy daily calls for the 12th of February, so we shall be keeping a close eye on that level. As you have probably noticed on our chart next important resistance is set at 102.93 and subsequently 103.43. If we see an hourly close above 103 we will purchase an hourly call option to reiterate our play.
However we should still be mindful of the downside risks to this pair. The correction lower that has started a couple of weeks ago may not be finished just yet as the full force of the move could reawaken any time. The first important support level is marked around 102.00.
If we manage to see a close below this level, we would abandon any bets to the call side and purchase daily put options for the 12th of February. An hourly close below will also result in buying an hourly put option. That said, watch out for Chinese data overnight - if its bad it could hamper the US dollar's push to the upside.
Daily updates will be published in the comments below.