The US dollar initially fell during the trading session on Monday, reaching down towards the 113.25 level. We bounce from there, and are starting to show signs of strength again. I think that the 113 level is going to be very supportive, and I think that we will eventually go looking towards the 114.50 level above as well. That begins a significant amount of resistance that extends to the 115 handle, so it’s not until we break above the 115 level that I think a longer-term “buy-and-hold” position will be a bit more comfortable. In the meantime, I suspect that short-term pullbacks should be nice buying opportunities, as the market continues to find reason enough to go higher. In general, I believe that the US dollar should continue to strengthen against the Japanese yen, as the treasury markets are dictating higher interest rates.
Even if we break down below the 113 level, I think that there is a significant amount of support near the 112.50 level, and again at the 112 level. It’s not until we break down below the 112 level that I am willing to sell this market, so although it’s not always a “buy-and-hold” type of situation, I believe that “long only” is probably the attitude that you should be taking at this point. Expect volatility, but that’s nothing new in this market, as the Japanese yen tends to be very volatile anyway. With a look at the central banks that make up the economies, it’s obvious that the Federal Reserve is much more likely to start raising rates than the Japanese central bank, so I believe we will eventually find buyers, especially if we can get some type of stability around the world, as that tends to be a momentum builder in this market as well.
Written by FX Empire