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US dollar breaks out against Japanese yen on Tuesday

By:
Christopher Lewis
Updated: May 16, 2018, 05:22 UTC

The US dollar finally broke above the ¥110 level during the Tuesday session, an area that has been resistive several times in the past. When you look at the hourly chart from the longer-term perspective, you can see that every time we have pulled back, we have seen a “higher low”, assigned that we were building up pressure.

USD/JPY daily chart, May 16, 2018

The US dollar has broken out during the session on Tuesday, finally clearing the drastically resistive ¥110 level. This is an area that has caused a bit of resistance several times in the recent past, and it looks as if now that we have cleared this area, the market is ready to go much higher. That’s not to say it will go up in a straight line, but I think that the ¥112.50 level above could be a bit of resistance. I think that at this point the ¥110 level will start to act as support, as the USD/JPY pair looks ready to go higher for the longer-term. I believe that the ¥112.50 level is a magnet for price, but I also recognize that we will probably break through there after a couple of attempts.

I don’t have any interest in shorting this pair, as I believe that the interest rate differential will continue to widen, as the Bank of Japan looks very unlikely to ease up on quantitative easing, and more than anything else would be likely to extend it. Ultimately, I think that dips offer value opportunities, so I would look to build a large core position in this market, unless of course we somehow turned around and broke below the 109 handle, which would negate a lot of the bullish pressure that we have seen recently. That seems very unlikely though, at least not without some type of major “risk off” situation out there.

USD/JPY Video 16.05.18

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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