The US dollar has initially tried to rally during the trading session on Tuesday but gave back any sense of bullishness against the Japanese yen to fall towards the ¥105 level by the time New York got on board. If we do break below the ¥105 level, it is very possible we may drop down to the ¥102 level over the next several days. The ¥105 level is not only a major psychological number, but it is also a structural barrier that should be paid close attention to.
USD/JPY Video 29.07.20
Below the ¥102 level, the Bank of Japan will start to get worried about the exchange rate and could come into the marketplace to cause issues. However, we are not there yet and let us be honest here: The Federal Reserve is trying to work against the value of the US dollar, and they typically get what they want when it comes to that over the longer term.
With that being the case, I think we do see a general move away from the greenback in the Forex markets, and that might even include buying the Japanese yen which is traditionally thought of as a safety currency. Because both of these are considered to be safety currencies, this might be a slower move than some of the other highflyers like the Australian dollar, but it does look as if it has shifted decidedly against the greenback in general. With that being said, I think short-term rallies are to be sold into unless something substantially changes.
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This article was originally posted on FX Empire
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