The US dollar rallied during the session on Tuesday, breaking above the 112 level against the Japanese yen. This is an area that continues to attract a lot of attention, and I think it’s only a matter of time before we continue to go to the upside. Remember though, this pair does tend to be very sensitive to risk appetite overall, so I think that the market will of course be influenced by stocks and bonds. Overall, we have a bit of a “risk on” attitude, but it is a situation where we continue to see a lot of noise as there are geopolitical concerns, and of course election results that have rattled the markets a bit here and there. Ultimately though, it looks as if we are trying to reach towards the top of the recent consolidation, which should send this market looking towards the 114.50 level. That’s an area that is massively resistive, but I think if we can break above the 115 handle, we are free to go much higher.
Pullbacks of this point in time should be thought of as buying opportunities, although they could be swift and sudden. It’s likely that the markets will continue to be volatile overall, but I think longer-term traders are of course attracted to this market. This will be especially true if interest rates continue to rise in the 10 year treasuries, which they have of course been doing so. This should continue to support the US dollar against the Japanese yen, and therefore I think the market will move inversely to tenure bonds. Given enough time, I believe that the markets continue to see a lot of noise, but ultimately, I much more comfortable going long than shorting. Either way, expect noise.
Written by FX Empire