The US dollar has initially tried to rally against the Japanese yen but as you can see gave back the gains. By doing so it looks as if the market is ready to continue trying to test the 105 support level, an area that has caused noise more than once. Rallies at this point should be sold into, as there is a definite downtrend at this point. The 50 day EMA above will cause a significant amount of resistance, just as the ¥107.50 level will. We have been in a bit of a downtrend as of late, but that impulsive candlestick from last Friday may have shaken out some people.
USD/JPY Video 10.08.20
The US dollar on its back foot makes quite a bit of sense with the Federal Reserve loosening its monetary policy the way it has, but ultimately, I do think that we have got further to go when it comes to the downside. In fact, I do not even have a scenario in which I am willing to buy this market until we are above that ¥107.50 level, something that seems to be very unlikely.
With that, I like the idea of fading short-term rallies, and believe that the choppiness will continue to be an issue, but if you are a short-term trader this might be a nice trading opportunity. Longer-term trades will take quite a bit of patience, as both of these currencies are considered to be safety currencies at the same time. In other words, both of these loose monetary policy situations are canceling each other out, but at this point the US dollar is still weaker than the Japanese yen.
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This article was originally posted on FX Empire
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