The US dollar fell significantly against the Japanese yen during trading on Thursday, reaching down below the 105.50 level that I have been talking about recently. I believe that this is a support “zone” that extends down to the 105 handle. If we were to break down below the 105 handle, that would not only be a breakdown of the zone, but it would be a breakdown of the major uptrend line that would open the door to the 100 level. Obviously, that comes with a lot of risk aversion, but that seems to be something that’s on everybody’s mind recently, so it’s not a huge surprise.
The alternate scenario is that we recapture the 106 handle, which would be very bullish. I suspect that we would need some type of good news for that to happen, but currently it looks as if tariffs on China have the markets spooked. Because of this, I suspect that gains are going to be somewhat limited, and the easiest trade is going to be if we get a daily close below the 105 handle, because then it shows an increase in momentum. Either way, it certainly looks negative at this point, so I don’t have any interest in trying to jump into this market without a daily candle showing signs that we are going to go higher. Regardless, I expect to see a lot of volatility in this pair as stock markets are starting to get very shaky, with commodity markets not being much better.
Written by FX Empire