The US dollar initially rallied against the Japanese yen, but found a bit of trouble at the 113.25 level. Because of this, it looks likely that we are going to continue to churn in this area, but I believe that the 112 level should be supportive. Keep in mind that this pair tends to be very sensitive to risk appetite, so pay attention to what the stock markets are doing. If they are bullish overall with stock markets, I believe that we can continue to rally significantly, but ultimately, I believe that the market may have several pullbacks to build up momentum, reaching towards the 114.50 level which was the top of the longer-term consolidation area. If we can break above the 115 handle, the market should continue to go much higher. Ultimately, I believe that’s what’s going to happen, but it’s going to take a while to get there.
Looking at dips
I look at these dips as buying opportunities, as the US dollar will be supported by the Federal Reserve shrinking its balance sheet. This market looks likely to be volatile, as it typically is, but given enough time we will probably see buyers. This is a market that has many reasons to go higher, especially considering that the stock markets have been so healthy. Ultimately, I suspect that we will probably go to the 120 handle, but that is some time next year, not this year. This volatility should continue, but I think that the buyers return every time we dip looking for value. The Japanese yen is bought in “risk off” trading, but those should only offer value as we have seen a much more stringent reaction by the bullish after each North Korean drama. I have no interest in selling.
Written by FX Empire