The US CPI data sent the USDJPY (and other JPY pairs) sharply lower. The decline was overdue as the price has extended to 1987 levels on the run higher. Nevertheless, it was a sharp 400 PIP move to the downside. Now what?
When you have a sharp move like we saw today, traders who could not get in (or get out of longs for that matter) hold their breath for the correction, and then often look to sell against the 38.2% retracement (or up to the 50%). That level on the USDJPY comes in near 159.05. The corrective move off of the low today reach 159.964 (within 10 pips of the 38.2% retracement).
As long as sellers lean against that level, the sellers remain in control.
In this video I outlined those levels and explain the trade.
This article was written by Greg Michalowski at www.forexlive.com.
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