Relentless yen buying has been causing a bit of havoc as the EUR/JPY and USD/JPY spent most of the day plowing through our beloved technical support levels ahead of tonight's CPI data scheduled to be released at 7:30 p.m. ET in Tokyo.  London caught wind of a rumor yesterday that tonight's CPI in Tokyo was leaked at + 0.7%, and the market was expecting 0.5%, which furthers the case of a BOJ rate hike.  Considering the bullish technicals that we have been working on all week, anything close to an expected CPI reading makes me think the shorts come and will be hard to cover. For those aggressive traders with nimble fingers who are in front the monitors tonight, watch for an initial push lower on a slightly better, or as expected, number with a hesitation into a support level of some sort. From there, look to get long with tight stops as traders who sold the rumor and are buying the news drive price back up. Don't get too comfortable with the trade, if you do take it. The market liquidity is thin in a volatile overall market environment, which makes for some nasty whipsaws.

While the yen is driving everyone nuts, let's look to a cleaner setup to continue our long dollar strategy that we have been working all week. USD/CHF is setting up nicely for a short squeeze through the significant September 2005 lows, now serving as a resistance point of 1.2245. The .618 retracement and 1.272 Fib extension shown on the big weekly chart contained sellers on the downside and is now looking to pop out of a nice consolidation pattern shown on the 3-hour chart.  The smaller, 30-minute inset chart shows the play we look for tonight to get long.  Wait for a break through New York highs of 1.2200 to an approximate 1.2215 high, followed by a retracement back to 1.2200 to get long.  Keep stops under 1.2175 and keep the target open there.  When your current unrealized profit is equal to your original risk, look to scale out of portions and trail a stop to breakeven. This setup is actually very similar to last night's USD/JPY play.

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.