The US dollar rallied significantly against the Japanese yen during the day on Tuesday, as we reached towards the 114 handle. I think there is a lot of noise between here and the 115 handle, so it’s very likely that we will have pullbacks occasionally. The 115 level being broken to the upside would be very bullish, and that should send this market to more of a “buy-and-hold” situation. I believe that pullbacks offer value, and I also recognize that the significant bounce from the 113.25 level below has shown that we have seen a significant momentum build, and I believe it is only a matter of time before we break above the vital 115 handle. At that point, I look at longer-term charts and start to formulate targets from there.
I suspect that the next 24 hours will be a bit choppy though, because it’s going to take several attempts to finally break out. I think that the market will continue to offer opportunities on dips, and that gives us an opportunity to take advantage of short-term weakness and building up the overall momentum and what has been a very strong uptrend. I believe that the absolute “floor” of the market is closer to the 112 level, so even on pullbacks, it’s likely to be a nice opportunity to take advantage of the recent US dollar strength in general. We have the Federal Reserve looking to raise interest rates, and after the landslide election results for Abe, it’s likely that the Japanese easy monetary policy continues, so all things being equal, this pair should continue to find buyers. I believe that we will eventually target the 120 handle, perhaps some time in the beginning of 2018, unless of course something drastic happens geopolitically.
Written by FX Empire