The US dollar has been very volatile against the Japanese yen during Thursday trading, but as you can see we have rallied, pulled back, formed an hourly hammer, and then rallied again. I think that if we can clear the 112.50 level, the market will go looking towards the 114.50 level above which is the beginning of massive resistance. That massive resistance should continue to be very difficult to overcome, so don’t be surprised if we see several pullbacks in an attempt to build up the necessary momentum to go higher. I also believe that the overall attitude of the US dollar is highly influenced by the U.S. Congress and whether they can pass significant tax reform. Currently, they have cleared a couple of hurdles, but the question now remains as to how stringent that bill becomes.
Ultimately, I look at this is a market that’s trying to form a longer-term bottom, and a break above the 115 handle is a “buy-and-hold” signal. In the meantime, I think that we will get several pullbacks but those are buying opportunities. It’s not until we break down below the 111.50 level that I would be concerned about what has been a relatively strong move over the last several sessions. The US dollar continues to show a lot of wherewithal, and quite frankly at this point in time with interest rates rising I think that it makes sense that we continue to see a lot of the same action as the Bank of Japan continues to look extraordinarily dovish over the next several months, if not years.
Written by FX Empire