The USD/JPY pair broke down significantly during the Wednesday session, slicing below the 112 level, an area that I thought would be very supportive. The fact that we broke down below this is a bit disconcerting for somebody who wants to go long, and it now looks as if we will probably continue to drop. However, if we return to levels above the 112 level, that would be very bullish sign. As I write this, the markets are reeling from the potential political fallout from the conversations with Russia by President Trump in the United States. That has had a very negative effect on risk appetite around the world, and that of course has an influence on this market. I do believe that longer-term we will continue to go higher, but right now we obviously need to step aside and let the market shake out.
If we can break above the 112 handle
If we can break above the 112 handle, that would be a very bullish sign and I believe that the market should continue to go much higher. I think the 113 level above will be the first target, followed by the 113.50 level after that. Alternately, if we break down to a fresh, new low, I believe that the market will then reach towards the 110-level underneath that will be massively supportive as well. This is really going to come down to what’s going on in the stock markets in the general attitude of traders around the world, but an argument could be made that most of the selling in the US stock markets could have been done by Europeans, and not Americans. How we finish the day is going to be very important, and if it looks like this was done mainly by foreign investors, it’s likely the Americans will pick up value and drive stock markets higher. That could drive this pair higher.
Written by FX Empire