The US dollar initially tried to rally against the Japanese yen on Monday, after gapping a bit lower. We broke above the 112 level, but then turned back around to fall to the lows again. However, I think there is enough noise in this area that eventually the buyers will come back to build up a base. If we can break above the 112.25 level, the market should continue to go higher, perhaps reaching towards the 112.50 level, and then going much higher from there. Pay attention to the interest rates in the 10 year note in America, because it has a massive influence on what happens in this pair. I believe that as interest rates in America rise, this market should rally as well. Also, it has a bit of a risk appetite component built in, so if stock markets rally, that could be reason enough to go higher.
Ultimately, even if we do break down below your, we should then go down to the 111 level. The 111-level underneath should be supportive, as it has been in the past, as well as resistance. I’m looking for some type of support, bounce, or supportive candle to take advantage of. Ultimately, the market should continue to reach towards the 114.50 level above which is the top of the overall consolidation area that the market has been stuck in for some time. If we can break above there, the market should then go to the 115 handle. A break above there would free this market to go much higher from the longer term, but that is something that I don’t expect to see in the short term. Long time frame traders will continue to build a position in this general vicinity from what I can see.
Written by FX Empire