The US dollar fell rather significantly against the Japanese yen during the trading session on Wednesday, reaching down to the previous downtrend line of the downtrend in channel, an area that I had suspected would be support. We have bounced back above the 113 handle, which shows a extreme amount of support, so I think it’s only a matter of time before we rally again and start reaching towards the 114.50 level above. That is an area that extends to the 115 level, which is a massive barrier. A break above there sends this market much higher, perhaps reaching towards the 118 level. However, I think in the meantime this is probably a better market to buy on dips, and take advantage of the volatility in the short-term trading manner. Ultimately, this is a market that I think continues to be choppy, so be careful with your position size, and recognize that it will take a lot of work to break out to the upside.
If we were to break down below the lows of the trading session for the Wednesday session, I think we will probably test the 112 level which should also be supportive, and a breakdown below there should send the market down to the 108 handle. At that point, the breaking of the 112 level, I would be a seller in this pair. However, until it happens I believe that pullbacks offer short-term buying opportunities that you can use your advantage. Overall, I believe that the market will break out longer term, but there is so many moving pieces in the headlines right now that I am playing this from a short-term perspective only, and will cross that bridge when I get to it. Pay attention to the interest rate differential, that should dictate where this market goes longer term.
Written by FX Empire