Prices settled into ranges in the overnight and morning sessions in New York after a very busy start to the week. This should not come as a surprise as we are probing what could be the reversal levels in the dollar pairs. Major trend reversals tend to be a process rather than an event as trend followers buy the pullbacks looking for trend continuation and reversal traders sell the rallies looking for the new trend lower. These two groups will battle it out for a while, and create choppy, range-bound price action before one emerges victorious producing the next trend.

Last night, our 110.35 USD/JPY bids were filled at about 5:30 p.m. ET and price immediately traded to a 110.85 high just before the Asian opening. At the minimum, the trade stopped at breakeven, if some profit wasn't booked prior to the reversal. Our initial risk was about 30 points on the trade and when current unrealized profit is equal to initial risk, book a partial profit and trail the stop to breakeven for a minimum 2-to-1 reward/risk on the remaining position.  The current unrealized reward was 1.5 times larger than your initial risk at 110.80.

We will continue to watch for USD/JPY long setups after the hourly downtrend channel break into the New York close. I am watching a .786 retracement at 109.65 from the 109.30 low Sunday night to last night's 110.85 high. The 1.0 Fib projection from the high last night points to a 109.65 support level as well, so the combination of these two form a solid bullish Gartley buy pattern at 109.65. We will be bidding here to pick up some USD/JPY into any dollar selling at the New York close with stops not closer than 25 points. We will also continue to watch EUR/JPY at the critical 140.90 support level.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.