Suggestion for Trade: Buy Limit @ 103.63, SL @ 103.43, Target 105.20
USD/JPY sharply pulled back into ascending wedge after the US Federal Reserve announced decrease in monthly asset purchase program by $10 billion triggering a sharp bullish trend in USD as expected.
Major Support & Resistance Levels
At the moment of writing the pair is being traded at 104.06 during Asian session where it is likely to face immediate hurdle around 105.25 (61.8% fib level), a break and daily close above this resistance may open doors for 111.00.
On downside, the pair is likely to find immediate support around 103.63 (channel support) ahead of 102.95(38% fib level) and then 102.50-102.60 support area. A daily close below this level may push the pair into negative territory targeting 99.65.
MACD is showing negative divergence on 4-hour and daily timeframe which means a correction might be in play before further upward movement. Relative Strength Index (RSI) is also in oversold territory indicating a correction in near future. 55 DMA is still above both 100 DMA and 200 DMA which shows that the pair is still under strong bullish trend.
Keeping in view the outstanding progress in labor market and overall growth outlook, US Federal Reserve chairman Ben Bernanke on Wednesday announced FOMC decision of reducing monthly asset purchase program by $10 billion. Moments after the announcement, skyrocket movement was seen in the US Dollar Index which gauges the value of American dollar against a basket of six major currencies. Contrary to this development, Bank of Japan is mulling over to increase its Asset Purchase Program that will cause more weakness to JPY, thus we may expect more rallies in USD/JPY as well as other JPY crosses in coming days.