We were all over the overbought dollar last night by way of USD/JPY on the anticipated 118.80 stop run. The plan was to wait for push towards the 118.80 stops, and then offer USD/JPY on a 118.95 limit ahead of the real push through the 118.80 stops, which we got in London. The high market at point 2 was 119.98-02, so you had the opportunity to get short just a few pips from the high before dollar sellers came in to push through the lows. Your low market this morning was 118.54-58 for a max potential profit of 37 points. We still target 118.00, as shown below.

If you are still short USD/JPY, I recommend you stay that way, but with conditions. EUR/USD is breaking out of a little consolidation pattern at 1.2555, as shown, targeting trendline and September break down resistance at 1.2635, which it may, or may not get. I do believe, however, this is a more Euro-specific move being fueled by a moderately recovering EUR/JPY back towards the overnight breakdown level of 149.00, rather than a dollar recovery. Look for two things to happen to remain confident in your USD/JPY short. First, watch for EUR/JPY to remain below 149.00, and second, DXC should break down through the potential 86.60-70 support zone. I might also take a shot at a little EUR/JPY short trade against the figure level with very tight stops.

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.