The US dollar fell significantly against the Japanese yen on Tuesday, slicing through the 110 level, and now looks very vulnerable to further downward pressure. The 110 level should now offer resistance, and I believe that the longer-term charts are where you need to be looking at to place your trade. I believe that a move down to the 108-level underneath is the target, simply because it is the 61.8% Fibonacci retracement level, and of course a large, round, psychologically significant number. As long as we can stay below the 110 level, I think the only thing you can do in this pair is sell, but I recognize there will be quite a bit of volatility in the meantime. I think that the bearish pressure could be relentless at times, as it seems like the US dollar in general is suffering.
Safety play?
It is possible that this is a bit of a safety play, especially considering all the tensions between Saudi Arabia and Qatar. I don’t know that’s the underlying driving force, but it certainly looks as if it has been a bit of a “risk off” session. Having said that, I do prefer shorting this market but I also recognize that a move above the 110.50 level would negate all the negativity that we have seen, and should send this market to the upside. Ultimately, this is a market that will remain volatile as it usually is, but to me I believe that rallies will continue to meet resistance and the 108 level is far too tempting for traders to ignore as markets have most certainly rolled over during Tuesday trading. If we break down below the 108 level, we then have a serious breakdown ahead of us in this market.
Written by FX Empire