US Dollar Sluggish Against Yen

The US dollar has rallied a bit during the course of the trading session on Monday but has also struggled a bit near the ¥115.50 level. At this point, we are testing the shooting star from the previous session, so it does suggest that we are going to see a little bit of hesitation. If we break down below the ¥115 level, we probably get a short-term pullback. Do not get me wrong, I do not necessarily want to start shorting this market, rather I think we are looking at a potential pullback in order to build up more momentum. After all, the US dollar is one of the stronger currencies out there, but we are a little bit overextended at this point.

USD/JPY Video 01.02.22

If we break above the top of the shooting star, that will more than likely send this market towards the ¥116.50 level above. That being broken to the upside makes is more of a “buy-and-hold” type of situation. In general, this is a market that remains positive so far, but that does not necessarily mean that we need to go straight up in the air. The 50 day EMA also offers support underneath as well, so it is not until we get well below there that I would start shorting.

Keep in mind that the pair is highly influenced by not only interest rate differential but also risk appetite. The risk appetite picking up will allow this market to go higher, but at the same time if the risk appetite breaks down, then it favors the Japanese yen. All things been equal, this is a market that features two safety currencies, but the Japanese yen can get expressly explosive if there is a panic.

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