Good afternoon forex friends! There's a technical setup forming on USD/JPY that looks very promising to work out, but with the US elections coming up tomorrow I'll be in "watching" mode for now.
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Technically, it's a pretty simple Fibonacci retracement setup that we've seen many, many times before. The pair is in a trend higher after coming up off of strong support (78.00) back in the beginning of October. This is due to recent weakness in Japan's economic data, prompting traders to speculate that the Bank of Japan may ease monetary policy even further. Also, the markets have been pricing in risk-off sentiment for a while now with the uncertainty of the US elections (and looming fiscal cliff) and the issues in Europe weighing in. Finally, I'm long bias the Greenback for the reasons my main man Forexgump argued here.
With the US elections coming up tomorrow, I'll hold off on putting in orders; but I will watch the potential support area marked on the chart above to see if it does hold after Tuesday. If it does (and we don't see a delay with election results), I'll look to jump in for a short-term swing position on a retracement to the Fibonacci area, (maybe a scaled in position), and target the next major psychological area of 81.00. Check out the daily timeframe and you'll see that this level stalled the markets plenty of times in both 2010 and 2011.
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