The US dollar has gapped higher at the open of the week, rallied towards the ¥111.35 level, and then pulled back significantly to reach below the ¥111 level. This is a market that should continue to see buyers though, because the gap of course will offer a lot of support. If we can break above the ¥111 level to the upside, I think the market will continue to reach towards the highs. I think that short-term pullbacks offer value as the US dollar will continue to strengthen due to the interest rate situation in the United States. As rates rise, it makes the greenback much more tempting to own, especially against the Japanese yen, which is driven by a central bank that has no interest in trying to tighten monetary policy.
Structurally speaking, I believe there is a significant amount of support underneath at the ¥110 level as well, so it’s only a matter of time before the buyers get involved. The upside I think goes looking towards the ¥112.50 level, which is an area that has been important in the past. This is an area that I think would attract some selling pressure, but it should only be temporary. I look at pullbacks as buying opportunities in a market that seems likely to go higher for the rest of the summer. I believe that if we did break down below the ¥110 level, the market could break down to the ¥109 level next, which I look at as a bottom to the overall “support zone” at the ¥110 level.