The US dollar fell during the session on Monday, breaking below the 110 level rather early. We went sideways after that, but then try to break above that level. We found sellers again, and it now looks as if the US dollar is going to continue to fall against the Japanese yen and perhaps tried to go looking for the 109 handles again. Risk appetite has a lot to do with how this pair behaves, and it seems as if risk appetite is starting to fall off. Because of this, the market should continue to go lower in the short term at the very least, but I think it’s probably going to be a scenario where traders will eventually go looking for value. In the short term, I would anticipate a moved to the 109-level based upon what I am seeing on the charts now. However, if we can break above the 110 level on a daily chart, we could find ourselves turning right back around and grinding to the upside.
Pay attention to stock markets, as they do influence this pair as far as the risk appetite is concerned. The S&P 500 seems to have a strong correlation to this pair over the longer term, so if it starts to rally, that could be a sign that this pair is ready to turn around and start rallying again. This is a market that has a lot of noise now, and has a lot to think about but it appears that we have broken down below the one hour uptrend line, and that of course is a negative sign. I’m not looking for some type of melt down, just perhaps more of a grind lower over the next couple of sessions.
Written by FX Empire