US dollar rallies against Japanese Yen on Monday

The US dollar rallied significantly against the Japanese yen on Monday, as traders returned to work. The market looks likely to continue to reach towards the ¥110 level above, which has been a scene of significant resistance. However, there are some signs on the weekly chart that give me pause for concern.
Christopher Lewis
USD/JPY daily chart, May 15, 2018
Bundle of Japanese Yen notes

The US dollar has rallied against the Japanese yen during the trading session on Monday, reaching towards the ¥109.50 level. The ¥110 level offers a significant barrier that the market has been struggling to overcome, and the weekly chart has formed a couple of shooting stars in this area, showing the ¥110 level to be massive in its importance. This typically means that we will rollover and selloff, and I still think that is very possible. However, I recognize that if we break above the ¥110 level, especially on a daily close, that could send this market much higher and send the pair reaching towards the ¥112.50 region.

Ultimately, this is market that will be volatile, and of course highly sensitive to interest rate differentials and the bond markets. We’ve recently seen interest rates in America drop off a big, and that of course has sent this pair lower. However, on Monday it looks as if this is a rally based on a “risk off” attitude around the world. I believe that the market breaking above the ¥110 level will of course set up an entirely new dynamic in this market, with the ¥110 level starting offer significant resistance.

If we do start to break down, I recognize that the ¥107.50 level underneath is a very significant floor, as it was such a massive amount of resistance before the breakout above that level. I anticipate that we will continue to see a lot of volatility, and quite frankly I would wait for some type of impulsive move on the daily charts to get involved.

USD/JPY Video 15.05.18

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