The US dollar continues to drift lower against most currencies around the world, and the Japanese yen was no different. This is a general “anti-US dollar bias” that we are seeing around the world, so I think it is a situation where we will continue to see rallies attract sellers.
The US dollar has drifted below the 111 level, and reached towards the 110.50 level below where we found a little bit of bullish pressure. The support I think extends down to the 110-level underneath, which is a large, round, psychologically significant number. It is the 61.8% Fibonacci retracement level from the longer-term, and therefore I would expect to see buyers attracted to not only that round number, but the Fibonacci trading signal as well. Because of this, if we break down below the 110 level, I think at that point the market is likely to breakdown rather significantly. In the meantime, I think there’s a lot of volatility that is just waiting to happen, so I like selling rallies in the short term, at least until we break above the 111.70 level.
Overall, I think that we will eventually find buyers underneath, but the 110 level needs to prove itself on a daily chart for me to consider going long. A breakdown below that level will more than likely send the signal much lower, to at least the 108 level. I would become aggressively short of this market at that point, but in the meantime, I think you’re going to see a lot of short-term back and forth trading going forward, and I think that given enough time we will probably see sellers return every time there is a short moved to the upside. I think that the market will continue to be very noisy.
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.