The dollar has moved steadily lower in Asia tonight bringing the EUR/USD daily chart into formation for the move lower towards 1.2350. We were focused on this for most of last week and now it appears to be underway. Unfortunately, we backed the wrong the horse by being short at 50% retracement. The 61.8% retracement, as shown below, was the winning ticket. We missed this EUR/USD short, but there are better opportunities to be long dollars elsewhere.

Considering the EUR/JPY strength in an improving dollar market, we should look to be long USD/JPY rather than short EUR/USD at any possible moment. The USD/JPY trendline resistance break is textbook. Let's look to buy the pullback to 116.50 after the 1.0 Fib extension failure at 116.70. Stops should be under 116.25 and initial take profit is at 117.00.

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

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