The USD/JPY has reversed upwards after hitting depths early this week that had not been seen since the first week of June.

As of this writing the USD/JPY is traversing close to the 134.200 mark in rather quick trading. After hitting a low of nearly 130.400 on early Monday morning – a value last seen on the 6^th of June, the USD/JPY currency pair has risen in value. Traders who thought the perceived ‘overbought’ days of the USD/JPY were coming to an end, and wagered on a one way direction downwards should pause to reconsider their strategy.

Technical Charts are Important, but Central Bank policies Matter and Uncertainty Remains

The ability of the USD/JPY to rapidly gain the past couple of days and the knowledge it is approaching important resistance levels again should cause contemplation for speculators who were convinced strong reversals higher would cease.  Yes, on the 27^th of July the USD/JPY was trading near the 137.480 realm before financial houses reacted to the interest rate hike from the U.S Federal Reserve. The selloff which followed was strong, but perhaps it was too strong.

• The upwards trajectory displayed the past few days of trading shows nervous sentiment remains sizeable regarding the USD/JPY, as a lack of clarity about U.S central bank policy stays murky.
• Tomorrow’s Average Hourly Earnings data from the U.S should be monitored and may have an effect on USD/JPY trading conditions.

If the USD/JPY can maintain its current values near the 134.000 level, this consolidation may be a sign financial houses are awaiting more insight from U.S data on the schedule tomorrow. Yes, the Non-Farm Employment Change numbers are due Friday, but it is the earnings data which should be watched closely.

If the hourly pay statistics comes in stronger than expected, the U.S Fed will have little choice but to remain hawkish regarding its interest rate policy. U.S Manufacturing and Services PMI data has been stronger than expected already this week.

Traders should not Expect Consolidation to Remain and Volatility is Likely

The USD/JPY could find a retest of the 133.750 to 133.250 values easily with reversals lower.  However, while U.S data stands in the shadows which could signal ‘the need’ for additional actions from the U.S Federal Reserve, financial houses may not be large sellers. The opportunity to look for slight reversals lower and place a buying position by day traders may prove enticing for short term wagers looking for upside. The near term is likely to provide additional fireworks for USD/JPY traders and further moves higher may be demonstrated.

USD/JPY Short-Term Outlook

Current Resistance: 134.350

Current Support: 133.690

High Target: 134.970

Low Target: 131.120

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The USD/MXN surged higher yesterday with a rapid movement that likely took many speculators by surprise and may have proven expensive.

Yesterday’s trading in the USD/MXN is a stark reminder for speculators that risk management is essential. Traders who were calmly seeking downside momentum on Tuesday on slight reversals higher after Monday’s lows traversing near 20.24000, may have suffered a death blow if they were not using stop losses yesterday and were over leveraged.

At one point yesterday the USD/MXN was tranquilly trading near the 20.51000 vicinity and may have looked like a good place to launch a short position. Short term day traders looking at technical charts may have viewed this juncture as a solid place to ignite a selling position. However, with a few lightning bolts, the USD/MXN was suddenly trading near a high of 20.83200. As of this writing the USD/MXN has come off of its highs and is traversing near 20.71000 with rather fast conditions still being demonstrated.

USD/MXN Express Train Upwards is a reason to be Suspicious and Extremely Careful

The move in the USD/MXN the past few days serves as a friendly reminder that Forex is not for the weak of heart. The vicious move higher can be explained by pundits by saying that growth forecasts in Mexico came in better than expected, but frankly it does not make sense – the Mexican peso should logically get stronger because of this result. Some may point to the lack of clarity regarding U.S Federal Reserve policy however that is suspicious thinking too, because clarity has been in short supply for a while.

• Traders should brace for the potential of further whipsaw results in the USD/MXN and use risk taking tactics with sincere care today.
• Yesterday’s massive buying spree will likely produce additional volatility as financial houses try to find equilibrium with the USD/MXN currency pair, which may cause further pain for day traders.

Support Levels need to be monitored and Speculators may Find Selling Tempting

Speculators who survived yesterday’s price action may be tempted to sell the USD/MXN if support levels start to look vulnerable.  Because of the elevator like ride upwards yesterday, support near the 20.69000 level should be watched carefully. This price which is very close to actual trading as of this writing could prove crucial. If it is broken lower and the 20.68000 to 20.65000 vicinities again are flirted with, it could mean selling pressure will reignite.

Yesterday’s buying surge after lows were tested on Friday and Monday which tested values not seen since early July, is a warning sign for traders that volatility is always possible in the USD/MXN. It could also mean there are speculative opportunities to sell and look for downside action, but risk management is crucial. Stay alert.

USD/MXN Short-Term Outlook

Current Resistance: 20.75800

Current Support: 20.68300

High Target: 20.82890

Low Target: 20.55900

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