The US dollar broke down significantly during the trading session on Wednesday, slicing through what would have been significant support. The 110 level of course is structurally supportive, but it is also the 61.8% Fibonacci retracement level of the bigger moved to the upside. Because of this, I feel it’s only a matter of time before the sellers return and I look at rallies as opportunities to take advantage of this fact. I look at the 110 level as being very likely to offer resistance, and based upon the measured move, we could go as low as 107.50 by the time the moves over with.
A break above the 110 level would of course be very bullish and would causes market to be even more sloppy than previously. It’s obvious to me that the US dollar is struggling overall, and it is also obvious that we are going to continue to see that. The Japanese yen is considered to be a “safety currency”, but this probably has very little to do with safety, and more to do with US dollar weakness overall. I suspect that this will be a reoccurring theme for the rest of the year, or at least the next few months. In this pair though, keep in mind that we will sometimes see the market rise on risk appetite, so we could get sudden reversals. I don’t know that we can break below the 107.50 level, so at this point I would suspect that’s the longer-term target.
Written by FX Empire