The US dollar initially fell against the Japanese yen during the day on Wednesday, but found enough support near the 112.25 level to turn around and rally significantly. By the end of the day, we have gained back most of the losses, so it’s likely that we will continue to see buying pressure every time we dip. The 112 level underneath is the current “floor” in the market, so I think that we will be looking for the opportunity to go long when we dip if we can stay above that level. Ultimately, if we can break above the 113.25 level, then the market should go looking towards the 114.50 level above which is the top of the longer-term consolidation that the market has been stuck in. I think that if we can break above there, the market should then test the 115 handle. A breakout above there should send this market much higher.
Keep in mind that this market moves based upon risk appetite and of course the treasury markets. The interest rate differential between the United States and Japan continues to favor a move to the upside, so I like the idea of buying dips going forward as the bond markets are certainly in control. Even if we break down below the 112 level, I think there is more than enough support underneath to keep this market interesting. It’s not until we break down below the 108 level that I think the overall attitude of the market has changed, which of course would make this a very negative looking market suddenly. Ultimately, I think that we do get the breakout above the 115 level that would be so important, but given enough time, I believe that we should have plenty of opportunities to build up a larger position with the choppiness.
Written by FX Empire