The US dollar fell initially against the Japanese yen, but found a bit of support near the 112.25 level. I think there’s even more support at the 112 level, as it has been significant lately. If we break down below that level, the market will find even more support near the 111 level, and both could be the launching point of something bigger. I think that the supportive action in this area is an opportunity to go long, especially if stock markets continue to show signs of strength, which lately they have been. This pair does tend to mock what goes on in the S&P 500, and of course more importantly: the treasury markets. The 10-year treasury market has seen rising interest rates in America, and that of course favors the US dollar in general. If that continues to be the case, the market should find plenty of reason to continue the upward trajectory.
I like buying pullbacks in this pair, because eventually the bullish pressure will take over and we should go looking towards the 113 level, and then eventually the 114.50 level above there as it is the top of the longer-term consolidation pattern that we have been stuck in. I think if we can break above there, then the market will test the vital 115 handle. This is my longer-term thesis, and I think that a break above the 115 level is a sign that we are going to go too much higher levels, offering more of a “buy-and-hold” scenario in this pair as we continue to find reason to rally. If we were to break down below the 111 level, the bottom of the longer-term consolidation can be found at the 108 level. However, that seems very unlikely to happen.
Written by FX Empire