The US dollar has initially gapped lower against the Japanese yen to kick off the week, but as you can see has struggled quite a bit after filling the gap. At this point it looks as if the market is probably going to go looking towards the potential uptrend line underneath, meaning that we could have a couple of rough sessions ahead of us. We have been in an uptrend and channel though, so I still favor the upside overall, as the market seems likely to grind it towards the ¥110 level, an area that I believe is essentially “fair value” in the market overall.
All that being said, the market can break down below the uptrend line, and if it does then it opens up the door to a potential return to the ¥105 level. That of course is a major move and would be one that signifies a lot of concern and fear out there around the world, but it is still well within the overall consolidation that I have marked on the weekly chart. Because of this, it is something that we need to keep in mind and my “line in the sand” is going to be at roughly ¥107.50 being broken to the downside. To the upside, there is still a slight gap at the ¥111 level that hasn’t quite been filled yet, and then the market could go looking towards the ¥115 level after that which is the top of the overall range as well.
This article was originally posted on FX Empire
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