The US dollar had initially pulled back a bit during the trading session on Tuesday, only to turn around and form a hammer like candle. This shows that the market is trying to reach towards the ¥110 level again, and I believe at this point it’s likely that we will continue to see a lot of resistance above so I’m not looking for a breakout in the short term. If we were to make a fresh, new high though, then it’s likely that the market goes looking towards the ¥111 level, perhaps even the ¥112.33 level.
USD/JPY Video 19.02.20
The 50 day EMA is below and showing signs of strength, as far as rising. So that could add a little bit more pressure on the pair, but obviously there is a lot of work to do. Pullbacks at this point continue to offer buying opportunities, as the pair is highly sensitive to risk appetite but perhaps even more importantly it has a nice correlation to the S&P 500. The S&P 500 has been rallying right along with the rest of the US stock markets, as the United States continues to attract a lot of monetary flows with it being one of the few places that continues to show strength.
Ultimately, it’s not until we break down below the uptrend line of the channel that it’s going to be a scenario where buying the dips continue to work. If we do break down below the bottom of the uptrend line though, it’s likely that the pair could drop all the way down to the ¥105 level. When looking at the longer-term chart, the ¥110 level it’s essentially “fair value” as it is the midway point between the ¥105 level underneath that shows support and the ¥115 level above showing resistance.
This article was originally posted on FX Empire
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