USD/JPY: The Gartley Has It

The start to the North American trading session has been a Chamber of Commerce type of day for the US economy with virtually all of the US data releases either beating expectations or showing overall strength even if it didn’t live up to expectations. The day was kicked off with beats on Chicago Fed National Activity Index and Continuing Jobless Claims and strove on with Housing Price Index and the Conference Board’s Leading Indicator. Misses came in the form of Initial Jobless Claims and Markit Flash Manufacturing PMI, but both of those figures showed positive elements.

As a consequence of all the good news in the US, equities are feeling the flow and rallying strongly with both Dow and S&P up over 1% on the day so far. The USD/JPY is also feeling the positivity as it has surged over 108, and has brought itself to a very interesting level of resistance that could prove to be difficult to summit. The reason for such a tough hill to climb is a historically reliable technical pattern called a Gartley Pattern which is completing right above that 108 handle.

The creation of the Gartley Pattern (a bearish one in this case) is a confluence of Fibonacci levels, both retracement and extension, of two separate moves in the market; both long and short term. As you can see from the chart below (Figure 1), a long term 61.8% Fibonacci retracement from the October high to the October low is matching up with the more recent 161.8% Fibonacci extension of an ABCD pattern that began at the low of the month.

If this pattern rings true, we may see a rejection at current levels and perhaps a return back to previous support under 107 before the weekend is upon us.

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 or CFD contract. 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. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. 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.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that FOREX.com is not rendering investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. FOREX.com is regulated by the Commodity Futures Trading Commission (CFTC) in the US, by the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investment Commission (ASIC) in Australia, the Financial Services Agency (FSA) in Japan, the Investment Industry Regulatory Organization of Canada (IIROC) in Canada and the Securities and Futures Commission of Hong Kong (SFC) in Hong Kong. Please read Characteristics and Risks of Standardized Options.