By gapping initially on the Monday session, this signified what I had been suspecting all along: that the US dollar is moving mainly upon tax reform expectations, and nowhere with this be more important than the USD/JPY pair as it has a lot to do with the overall attitude and flow of money between the 2 economies. I believe that the markets will rally significantly from here, but we probably need to pull back to fill the gap, or at least reached towards that area. A move above the 113 handle for more than a few hours signals that this market is ready to go to the 114.50 level above, which is the next major resistance barrier, which of course extends to the 115 handle as well.
I believe that the 112 level absolutely must hold as support if the buyers are to finally get their hands around this market. I also believe that with the tax reform votes coming up in the U.S. House of Representatives, we could get more volatility ahead. Nonetheless, it does look like the buyers are trying to extend the gains, and I think that overall, it’s probably best to think of this as a bullish yet choppy market
If we were to break down below the 112 level, this would start to look very bearish, especially considering how bullish we have been over the last week. Expect more noise, but longer-term I suspect that the buyers will get their way.
Written by FX Empire