In last month's report we recommended buying the USD/JPY pair, keeping our targets at 110.28 and 111.65. The pair rose directly to achieve the targets and recorded its highest level 114.37 in May, then it declined after the President of St. Louis Federal Reserve Bank James Bullard expressed concerns over the interest rate prospects as low unemployment would be unable to boost inflation in the US.
The pair is trading now in the first session of the week at 111.36 inside a downside price channel. Last week it declined after we saw a divergence between the last two tops on the chart and the MACD indicator. The prices are still moving below the Moving Average 50 indicator which is an important resistance zone for the pair.
The Next Few Days After we saw the divergence and paid attention to the negative news from the United States last week regarding the interest rate, the pair declined to trade below the SMA. We can sell it now at the current prices 110.35 and keep the targets at 110.23 and 108.34. However, if the pair rises to the upper limit of the channel we can take sell positions again, as long as it is still trading inside the channel.
We have to be careful about any hot news this week like the FOMC meeting and the preliminary GDP from the USA.
