Economic data is generally light until Thursday's Trade Balance release. And to be honest, that's perfectly fine with me, because the market is still trying to digest Friday's 5-year unemployment low gem. The 10-year yield is only slightly better on the day after Friday's largest single-session increase in the past 15 months. The dollar has recently fallen into a tight correlation with the 10-year rate, most noticeably in USD/JPY, and should be closely watched for signs that Friday's move was nothing more than a retracement higher in the course of the longer-term downtrend.

Technically speaking, USD/JPY has dropped out of the parallel uptrend channel originating from the May lows, which is now being revisited, but this time as resistance. We will be looking to sell into this resistance zone targeting the 200-day sma at 116 and change.

If you will recall, on Oct 27, Japanese Vice Finance Minister Watanabe issued a statement saying that he does not expect further yen weakness, considering Japan's current economic conditions. This statement came hours after EUR/JPY printed an all-time high of 150.80, which was interpreted by the market as verbal intervention to strengthen Yen. EUR/JPY dropped almost two big figures to a 148.88 low following that statement. Interestingly, USD/JPY was trading 118.50 prior to Watanabe's statement and shed some 100 points to a 116.60 low. Well, here we are again with EURJ/PY back above 150.50, which could be possible intervention levels, and USD/JPY back at the pre-Watanabe- levels. So if history is to be repeat itself, we might here some chatter from the MOF to defend the EUR/JPY highs, which pulls USD/JPY lower along with it.

Technically speaking, we are bumping up against the channel resistance, along with a pair of Fib resistance levels clearly labeled, in the 118.50 zone. ROC has wandered into overbought territory indicating the current rate of ascent has likely reached its maximum velocity. I am short a one-third position at 118.40 with the other two-thirds to go at 118.48 and 58 with stops for the whole boat above 118.75. The target will remain open for now.

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.