The US dollar fell against the Japanese yen after initially surging much higher during the day on Monday. We are testing an uptrend line that had been broken, so if we can break above the 110 handle, this market should be very bullish. Ultimately, I think that a move above there should send this market looking towards the 112.50 level. Alternately, we could find ourselves drifting lower from here, and quite frankly I think it comes down to the risk appetite of traders around the world. A lot of this has been due to the North Korea nonsense, which seems to be cooling down finally. Because of this, it looks like the safety trade may be abating a bit, and with that being the case I think we will start to focus on the interest rate outlook of the United States and Japan. That favors the US dollar in general, and I think that the breaking above the 110 level will bring in a fresh batch of buying orders.
The alternate scenario
Obviously, the alternate scenario is to break down, but I think it’s going to take a fresh round of fear to have that start happening. Because of this, I do favor the upside but I also recognize that you’re going to have to be very patient to realize profits. Ultimately, I believe the volatility is here to stay, but I still favor the upside as it looks like we are starting to see some resiliency near the 109.50 level as I record this.
Written by FX Empire