We are coming into the Asian open at with USD/JPY offers on the book for the gap fill described below. The highlighted zone is the area that needs to trade in order for the gap to be officially closed. And after that gap is closed, we want to be short the market at the best price possible, because more often than not market trends reverse shortly after a gap is filled. The gap will be officially filled at 116.45, which is our first target short entry level, and the 1.618 Fib extenstion on this chart, as well as the .786 retracement from the 4-hour chart comes in at 116.65, which is our second short entry. Stops should be just above 116.80 and the target is 115.80. As mentioned below, look for confirmation from EUR/JPY failure below 146.50 to tell us our USDJPY idea is on the money.

Dollar strength has sent EUR/USD to the bottom of the range, which means still above 1.2550 support, and USD/CHF to the top of its range, which means still below 1.2450 resistance. EUR/USD was a no-trade last night because the 1.2680 resistance was not cleared. The yen products did break ranges however as EUR/JPY and USD/JPY were in play as EUR/JPY breached 10+ year highs.

Look for EUR/JPY to find short-term Fib resistance below the 146.50 level at 146.35. We're not looking to trade this yen product, however, as USD/JPY is showing better opportunities.

USD/JPY is the play from a gap on the chart back in late April that has yet to be filled. The EUR/JPY strength has pulled USD/JPY above June highs of 115.75 and is now targeting the lower end of the gap at 115.96, and then ultimately the upper end of the gap at 116.44. If EUR/JPY tags our 146.35 level, and drags USD/JPY to the upper-end of the gap fill level at 116.30-40, we look to get short USD/JPY at 40 and 50 with stops above the .786 retracement on the chart at 116.75. This is very aggressive trade setup that involves buying yen against dollars, as yen is at multiple year lows against the euro. So in other words, if you're not one to use stop losses, I would suggest passing on this trade.

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.