While EUR/USD is sorting itself out around 1.2900, USD/JPY is contemplating a breakout above 122.00. Above 122.00, and we're looking at a possible seven-big-figure breakout towards 129.00 in coming months. The 129.00 zone is stacked with Fib resistance levels, and could certainly be tested in light of the recent soft data out of Tokyo. The wave count with the three separate Fib calculations are illustrated on the chart.

As I write, USD/JPY is consolidating right around the January 24 highs of 121.80. Rather than flipping a coin by trying to play the breakout here, I outlined two entry scenarios to minimize our guess work. First, USD/JPY fails at 121.80 and pulls back to Friday's highs of around 121.60 offering up a nice long entry. Keep stops below 121.30. Or, if USD/JPY does break higher from here, wait for 122.00 stops to be cleared and buy into the retest of 121.75 with stops under 121.50. If entry #1 goes into effect, use a test of 122.00 to book profits on a half position and re-bid into 121.75, as described in scenario #2, to re-establish your full position. Personally, I'm looking for scenario #2 because I believe EUR/USD will put in a minor bounce from 1.2900 for reasons described on Friday.





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.