The US dollar skyrocketed against the Japanese yen during the session on Monday, touching the 113.50 level during the day. We are starting to pull back a little bit, as we are bit overextended, but quite frankly it looks as if the buyers are going to jump back into the market every time we pull back. I think that the 113 level should be supportive, just as the 112-level wall almost certainly be bullish as well. I think that the US dollar should continue to strengthen in general, as we are starting to see strength in the US dollar against currency such as the Euro, and the British pound. If that’s the case, it will certainly rally against the Japanese yen which of course is a softer currency currently.
Overbought
The market is most certainly overbought, as the move on Monday was straight to the upside. However, I think that this impulsivity is something that the buyers will be looking towards, and I think that pullbacks will offer value that people are willing to take advantage of. I believe that the Japanese yen will continue to sell off if stock markets look healthy, and the earnings in the S&P 500 have been very strong so far. This should continue to put bullish pressure in the stock markets, which by extension has the Japanese yen selling off. I look at the 113 area as an area that buyers may be attracted to. A breakdown below there should find plenty of support down towards the 112-level underneath. The market will continue to be noisy, but I believe that the buyers will continue to look at this as a “buy on the dips” trend that is strengthening over the longer term and aiming towards the 115 handle.
Written by FX Empire