There's something very familiar about all this, and I can't seem to put my finger on it? Could it be that for two days in a row the USD/JPY broke through resistance at around 10:00 a.m. ET, reversed, range traded for most of the day, and then ramped up again to close in New York at the session highs? Umm, of course it is.

Now, to push our luck, will USD/JPY break through the New York highs before Asia comes in for the morning, and then retrace back to retest the New York highs from above as it did yesterday? If so, we should consider that a monster entry level to get long on the retest of the New York highs from above, say around 112.95, for the move to 113.40 that is discussed below. Keep your stops around 112.65.

What is exactly the big deal about 113.40 and why exactly could it ruin our dollar recovery party that we have been having so much fun with?  Well, we have to pull out the big club, or rather chart, to see why. 113.40 happens to be the intersection of the 2005-2006 former uptrend support now serving as resistance, as well as the Jan 2006 low. And you know the saying, what was support becomes resistance. If we are long USD/JPY tonight, you can bet we're bailing into this level and most likely flipping the position to get short.

Price action from the last three days has also put put a Fib pattern together known as a Butterfly that points to a retest of the January 2006 lows at 113.40.  A 1.272 Fib extension and measured move AB=CD arrive at a 113.40 zone.

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

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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.