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 30 and S&P 500 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', 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.
Source: www.forex.com
For more intraday analysis and trade ideas, follow me on twitter (@FXexaminer ).